The constant interruptions of electrical service in multiple regions of Venezuela can slow down national economic activity at a time when an improvement is expected in the performance of some sectors, such as oil, according to analysts consulted by the The Vermilion.
The electrical crisis, declared an “emergency” by the government of former President Hugo Chávez, in December 2009, persists in multiple regions of Venezuela.
Users in most states of the country continue to report unexpected failures and daily rationing of electricity for hours, which not only poses challenges and inconveniences in personal and family routines, but also in business ones.
From January to September, reports of power outages increased by 28.6% in the main regions of the country, according to the Venezuelan Observatory of Public Services.
One of its recent reports warned about insufficient electricity generation in the country: only 12,000 megawatts of the 36,000 megawatts of installed capacity are available.
The non-governmental organization, as well as other civil associations, such as the Committee of People Affected by Blackouts, have recorded constant blackouts in 17 of the country’s 23 states, especially during peak hours, such as 6 a.m., noon, and 5 p.m. pm.
Also, it confirmed failures in the transmission system from the south of Venezuela, where the El Guri hydroelectric plant generates 80% of the energy consumed in the country.
Thus, regions at the “tail of the system”, far from the south, such as Zulia, key to the country’s oil industry since the last century, experience longer and more frequent outages, according to the Observatory.
A problem that limits the economy
Economist and data scientist Giorgio Cunto explains that the performance of economies is structured around the availability and continuous use of electrical energy since the last century.
If it fails, economies suffer.
“The capacity that a country has to provide, generate, transmit and distribute electrical energy is one of the fundamental pillars around which it can delimit the depth and extent of its economic activity,” he comments.
Cunto observes that, in Venezuela, the failures in the electrical service correspond to “a generalized crisis in the provision and coverage of public services that negatively impacts that economic activity.”
In his opinion, “it limits it structurally.”
Every blackout represents “a shock that substantially reduces or even paralyzes economic activity” in any sector, such as commercial, industrial or manufacturing, says Cunto, with specialized studies in finance and economics at The London School of Economics and Political Science ( LSE), from England.
These sectors, in the event of electrical interruptions, “are completely paralyzed or reduced in scale and sophistication,” he tells the The Vermilion.
“That is work that is not done, added value that is not given, wealth that is not created and well-being that is lost,” he says.
“Paralysis” on several sides
Independent researchers warned that the South American country entered a technical recession in the first half of 2023. According to the opposition-leaning Venezuelan Finance Observatory (OVF), the national economy fell 7 points in that period.
President Nicolás Maduro vehemently rejected these records and assured that Venezuela would exceed 5 percentage points of growth in the year.
The same OVF said this week that the Venezuelan economy had grown 2.4% in the third quarter of the year.
This rebound occurs weeks after the United States eased its economic sanctions on Venezuela’s oil and gas sectors to encourage the signing of political agreements between the Maduro government and its opposition in Barbados.
The negative effects of power outages are not only limited to the moment of service interruption, Cunto highlights, for his part.
“An (electrical) paralysis has an impact on surrounding activities, it is a bottleneck throughout the entire production process,” says Cunto.
The deterioration of Venezuela’s electrical system “is one of the main obstacles to the growth and dynamization of its economy” and is one of the factors that make its potential growth “ceiling” “so low,” he says.
Many cuts, little fruit
The common anecdote in Venezuela is that the electricity is failing where it did not before, such as in Carabobo, emphasizes the economist and university professor Aldo Contreras.
Electrical outages lasting several hours a day “make the economic apparatus not dynamic” and Venezuela has “a more inefficient economy,” he warns.
It specifies that the industrial areas on the border between Ureña, Colombia, and San Cristóbal, in western Venezuela, spend up to 12 hours a day without electricity.
Contreras, a specialist in international economic relations, indicates that the costs associated with blackouts usually impact the pockets of private companies.
“Industries have to generate their own electrical energy at much higher costs. “They have to purchase a power plant for between 10,000 and 20,000 dollars, install a timing belt, spark plug, technical costs, supply it with diesel or gasoline purchased on a parallel market” due to its shortage at service stations, he specifies to the The Vermilion.
The lack of credits and tax incentives, as well as the absence of a schedule for electrical outages, add to the list of challenges for industries in Venezuela, he adds.
The country also depends exclusively on thermoelectric and hydroelectric energy, not even on other “clean” ones, such as wind energy, solar panels, not to mention nuclear energy, he recalls.
A political agreement signed between the ruling party and the Venezuelan opposition in the negotiations in Mexico City, 1 year ago, contemplated a fund to address public service problems, such as electricity, as well as health and education.
The United Nations, which will manage that fund, said last month that it will establish a multi-partner trust fund to benefit “vulnerable people in Venezuela by providing them with health care and other basic needs.
While the opposition affirms that the country is “on the verge of a mega blackout” like the one that occurred in March 2019, government spokespersons, such as Minister Néstor Reverol, attest that the stability of the electrical service is guaranteed.
Contreras, for his part, believes that it is imperative that Venezuela recover its electrical system to lift an economy that succumbed by nearly 80 points between 2013 and 2021.