Speaker 1: Bloomberg Audio Studios, podcasts, radio news.
Speaker 2: It might be charges that center around drug trafficking, but
Speaker 2: it has been a white house that is keenly focused
Speaker 2: on what happens to oil in Venezuela. For more on
Speaker 2: the fallout of Maduro's capture, we are joined now by
Speaker 2: Wilbur Ross. He served as Secretary of Commerce in the
Speaker 2: first Trump administration. Mister Secretary, thank you so much for
Speaker 2: joining us this morning, and you oversaw the Commerce Department
Speaker 2: at a time when economic policy was increasingly becoming a
Speaker 2: national security tool. With this latest action in Venezuela, what
Speaker 2: has changed? Does that become even more apparent as a
Speaker 2: tool for this administration.
Speaker 1: Well, I think it's clear that a lot can be
Speaker 1: done and should be done to change the economics of Venezuela.
Speaker 1: I'm going to give you a few data points. They
Speaker 1: probably have three one hundred billion barrels of oil of
Speaker 1: proven reserves. At fifty dollars a barrel, that's fifteen trillion
Speaker 1: dollars of reserves. So in terms of being able to
Speaker 1: handle the debts that they have, which are substantial but
Speaker 1: are only one hundred and sixty billion, So compare that
Speaker 1: to oil reserves will into the trillions. It should not
Speaker 1: be that bigger problem. The bigger problem is that because
Speaker 1: of poor management, poor maintenance, and running out of parts,
Speaker 1: the oil production has gone down by more than two
Speaker 1: million barrels a day, a fifty dollars a barrel. That
Speaker 1: works out to about thirty seven billion dollars a year
Speaker 1: cost to the economy. Those are huge, huge numbers, especially
Speaker 1: when you consider the whole population is only around twenty
Speaker 1: seven million people because some seven million people have fled
Speaker 1: the country under Maduro. And it's not just oil. There's
Speaker 1: a lot else that can be fixed. For example, agriculture
Speaker 1: is twenty five percent of the land mass of Venezuela,
Speaker 1: but it's only three percent of the economy and only
Speaker 1: ten percent of the labor force. And the reason for
Speaker 1: that is that they don't have fertilizer. Their equipment, tractors
Speaker 1: and reapers and things are pretty well broken down. They
Speaker 1: need spare parts. So there's a lot of stuff that
Speaker 1: can be proved and improved pretty quickly. Agriculture, for example,
Speaker 1: could be brought back very very fast. Venezuela had been
Speaker 1: one of the most verdant soils in all of Latin America,
Speaker 1: and it was one of the reasons why Venezuela was
Speaker 1: as popular and as prosperous as it had been. But wilburt,
Speaker 1: what needs to happen? And they were bringing Colombians in
Speaker 1: to help on the fields because they didn't have enough workers.
Speaker 3: Can I just break in, Wilburn asked, you know, this
Speaker 3: is your specialty. You made your name before you ran
Speaker 3: trade policy for commerce at the cabinet level, negotiating for
Speaker 3: creditors in the biggest names of bankruptcy TWA and Texico
Speaker 3: and Drexel, Burnham Lambert. Then you obviously became the biggest
Speaker 3: rest structuring expert or one of them in the US
Speaker 3: would turn around of massive businesses like US deals. So
Speaker 3: this is what you do. What needs to happen for
Speaker 3: capital to go into Venezuela and do the very same
Speaker 3: What kind of stability, what kind of rule of law,
Speaker 3: what kind of sure prerequisites need to be met?
Speaker 1: Right? Well, there's a lot that needs to be done
Speaker 1: in terms of laws. Venezuela has the weakest property rights
Speaker 1: laws in the whole world, So that has to be
Speaker 1: fixed so that you have some assurance of private sector
Speaker 1: continuing ownership. But I think realistically companies going in now,
Speaker 1: in a relatively complex situation, are probably going to want
Speaker 1: guarantees against expropriation, and that's not unusual. The US and
Speaker 1: multinational entities often give expatriation and foreign ext change guarantees. Now,
Speaker 1: the debt structure is mind bogglingly complicated. They have about
Speaker 1: one hundred and sixty billion of debt altogether, counting expatriation claims,
Speaker 1: counting of funded debt, counting debt for oil, counting everything.
Speaker 1: Those bonds have been trading in the high teen's low twenties.
Speaker 1: They could probably be restructured in the thirty to forty
Speaker 1: cents on the dollar. So in the overall context, that's
Speaker 1: not a very big number. And one of the few
Speaker 1: good things is that the IMF has no exposure to Venezuela,
Speaker 1: and IMF is entitled to lend up to fifty billion dollars,
Speaker 1: so they could very well be a source of some funding.
Speaker 2: On that point, before we continue, Wilburt because some of
Speaker 2: the exposure we do understand comes from China and debt
Speaker 2: owede to Chinese banks. For example, if there is a
Speaker 2: restructuring of debt in the country, do you expect the
Speaker 2: US to exert force of who gets priority in the
Speaker 2: capital stack, does it change where back payments in different
Speaker 2: restructuring comes from. Just given the geopolitics of the moment
Speaker 2: between the US and China.
Speaker 1: Right well, both the Chinese and the Russians had made
Speaker 1: loans to Venezuela that are payable at least partly in oil,
Speaker 1: but oil at very very advantageous prices to them, So
Speaker 1: they are part of the problem in that they're getting
Speaker 1: oil very cheaply out of Venezuela in return for debts
Speaker 1: that otherwise and never going to be paid. Now, the
Speaker 1: oil that comes out of Venezuela is mostly what we
Speaker 1: heavy oil, and that requires a slightly different refining process
Speaker 1: from the American shale oil, which is mostly light oil.
Speaker 1: Both China and India have very strong facilities for processing
Speaker 1: heavy oil because a lot of the Iranian oil that
Speaker 1: they had been getting also is heavy. And in the
Speaker 1: US there are a number of refineries in the southern
Speaker 1: part of the country, particularly the old Sitco refineries, that
Speaker 1: were established from the very beginning, to handle this oil.
Speaker 1: So while it is a little bit different and it's
Speaker 1: a little more costly to refine at anything like fifty
Speaker 1: dollars a barrel. It's still going to be very very cheap,
Speaker 1: I says. The extraction costs in Venezuela, once you've got
Speaker 1: it up and running and with proper equipment, are going
Speaker 1: to be very very low.
Speaker 3: Can I just ask me over We've only got other
Speaker 3: natural reasons. We've only got a minute left here, and
Speaker 3: I want to ask, well.
Speaker 1: It has lots of gold, most of which is not
Speaker 1: being used for lawful purposes.
Speaker 3: Well, speaking of lawful I just want to.
Speaker 1: Ask transport planes every day flying to Iran with Venezuela
Speaker 1: and gold fair.
Speaker 3: We've only got a minute left, and I just want
Speaker 3: to ask you about the precedent risk here. Does removing
Speaker 3: a sitting head of state on criminal grounds create a
Speaker 3: precedent that we have to live with later? Do other
Speaker 3: great powers now reserve that right for themselves as well?
Speaker 1: Well? The whole situation is very complicated. I'm not close
Speaker 1: enough to what's happening on the ground to figure out
Speaker 1: exactly how resolve the political issues. But Secretary Rubio has
Speaker 1: indicated on other television shows over the weekend that perhaps
Speaker 1: the ultimate solution to the governance of Venezuela is new elections,
Speaker 1: and if they are properly supervised, that might well be
Speaker 1: an answer.
Speaker 2: All right, Commer Secretary, I'm sorry to jump in. We
Speaker 2: are just up again the commercial break. Thank you so
Speaker 2: much for joining us, though. That is Wilber Ross, former
Speaker 2: US Commerce Secretary, as we assess the fallout of Nicholas
Speaker 2: Maduro's capture, who's currently on US soil in New York
Speaker 2: facing trials