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Illicit economies produce a fifth of Venezuela’s GDP | International

Gasoline bottles for sale on a street in Caracas.
Gasoline bottles for sale on a street in Caracas.LUIS BRAVO (AFP)

To understand Venezuela, you have to understand how an oil country fell into an unprecedented humanitarian crisis, bankrupted its economy in less than a decade, and mutated from a system of controls to unbridled capitalism amid economic sanctions. Part of the answer is hidden in illegality, in the underground income that enriches an extensive and diversified network of corruption, whose value, the organization Transparency Venezuela has calculated at a fifth of the country’s GDP, according to a recently published report.

In one year —according to this investigation— the corruption network is capable of generating at least 1,900 million dollars with activities associated with fuel smuggling and 1,800 for the illegal sale of gold; 4,919 million dollars for drug trafficking in the national territory and around 825 million dollars for extortion in ports, reveal the calculations made by the firm Ecoanalítica for this Transparency report. Only the amounts for these four crimes represent 21.7% of the size of the country’s GDP in 2021, calculated at 43,440 million dollars.

This is outside of what state corruption has swallowed in cases that have reached courts in more than 22 countries where 116 cases linked to Venezuelan corruption involving more than 64,000 million dollars have been opened, according to the organization’s investigations. Since 2012, Venezuela has ranked among the top five places in Transparency International’s Corruption Perceptions Index in the public sector. This year was the most corrupt in the region, followed by Haiti and Nicaragua, a plunder that leads to serious violations of the economic rights of Venezuelans. This has occurred while 90% of the population remains below the poverty line.

“The network of corruption in Venezuela grows and deepens. There are reports from many countries of confiscating goods, gold, drugs and fuel. They are crimes that are visible to everyone, ”Mercedes De Freitas, director of Transparency, tells EL PAÍS. “These activities have incredible weight, and there is no economy that comes close to those amounts.”

Even when in the midst of a pandemic the Venezuelan government decided to increase the price of gasoline frozen for years, gasoline smuggling is a lucrative business that takes advantage of the porosity of the borders and the lack of control that have led to more than seven years of diplomatic tensions with Columbia. The border closure that has lasted for more than three years, despite the recent reestablishment of relations between Bogotá and Caracas, still protects part of this economy in the shadows that goes from the fuel bottles that are sold at retail to larger networks, the researcher points out.

Until 2018, when the difference in the price of gasoline in Venezuela and its neighbors in Colombia and Brazil was an abyss, smuggling generated income of between 1,860 million and 2,800 million dollars with the leak being 80,000 barrels per day. “This smuggling network learns with incredible speed, it is resilient and manages to generate new processes to continue capturing public income. For example: when the price of gasoline rose, the network adapted and began to sell gasoline from Colombia in Venezuela”, he denounces.

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De Freitas and another researcher from her organization traveled to the El Callao mines to study in depth the voracity of mining in the south of the country, where local NGOs and the United Nations warn of the great social and environmental impact of the activity. In 2016, Maduro decreed that 111,843 square kilometers, 12% of the national territory, would be part of the Orinoco Mining Arc, a strip of resource exploitation, in particular gold, which according to the laws must be sold preferentially to the Central Bank of Venezuela. .

Gold has been the government’s lifeline in the years of the brutal drop in oil production and Washington’s economic sanctions. That exploitation is a black box to decipher. According to Transparency estimates, around 2,000 million dollars in gold are exported annually, but on average “only a little over 500 million dollars enter the national accounts, that is, more than 75% is traded illegally, with the consent and participation of State officials and security and defense bodies.” Irregular groups such as the FARC dissidents and the ELN guerrillas are mentioned in this report and others as part of these networks.

“That gold comes out of Guayana in many ways,” explains De Freitas. “Large quantities leave by air, go to Colombia where they are nationalized as legal Colombian gold, and thus can be legally exported to any country. And this reaches Turkey, Belgium or Holland”. In the field, Transparency also found how the dynamics of crime in the mines, formerly controlled by “unions”, which acted as a criminal gang, had changed. “Now there are no gold unions, but it is called the system. Everything that the State should provide as security, the rules to settle disputes, permission to work, is provided by the system”, says the researcher. “And this has not happened because the State has withdrawn from there. The institutions are still there, but it is very complicated to know what is legal and what is not.

The report states that the illicit economies in the country are in a “symbiotic phase”, of close interdependence between organized crime and the political and economic system. A scenario in which the borders are tenuous. “This is the phase of highest risk for democracy, since the organization appropriates the symbols of liberal democracy in a context of electoral legality and social legitimacy, including that which traditional and emerging allied economic elites can transfer to it,” says the study.

Containers and checks

The multiplication of taverns and huge stores of food, furniture, appliances and all kinds of imported items that is seen in the main cities of Venezuela is also underpinned by the illicit economies that operate in the ports. “A large part (between 20 and 30%) is about door-to-door imports and what is known is that for each of those containers between 20 and 40 feet, an average of $10,000 is paid at the ports for entry. of the merchandise without declaring the real value or paying taxes.

Another fact that the study reveals is that of the alcabalas on the roads, which become tolls for extortion, affect the transport of goods and have a direct impact on the inflation that the South American country is experiencing, the highest in the world. It is part of the daily life of any worker of a cargo company or agricultural producer to have to pay or leave part of what they carry at one of the more than 300 police and military checkpoints that exist on trunk and regional roads in the country. Through a survey carried out among companies dedicated to this activity, the Transparency study concludes that there is a 25% probability of being extorted by security forces in one of these checkpoints.

De Freitas points out that other illegal, but irregular and opaque, legal modalities are added to these illicit economies, which the Maduro government has implemented in the last three years of economic opening and the search for alternative sources of income, in the face of the debacle of the industry. oil company and the difficulties to sell crude oil after the sanctions. The export of scrap and the transfer of state companies and assets are two of them. “In the context of the country’s crisis, the government has managed to circumvent sanctions, relying on those allies that have more opaque dealings with authoritarian governments and mechanisms to evade sanctions,” says the researcher. “The country that we have today gives many opportunities to the network of corruption and impunity gives them guarantees, because there is no accountability or information. It’s the perfect state to do whatever they want.”

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