WEBVTT - Former US Commerce Secretary & Ross Acquisition Corp II Chairman & CEO Wilbur Ross Talks Overthrowing Maduro

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<v Speaker 1>Bloomberg Audio Studios, podcasts, radio news.

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<v Speaker 2>It might be charges that center around drug trafficking, but

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<v Speaker 2>it has been a white house that is keenly focused

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<v Speaker 2>on what happens to oil in Venezuela. For more on

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<v Speaker 2>the fallout of Maduro's capture, we are joined now by

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<v Speaker 2>Wilbur Ross. He served as Secretary of Commerce in the

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<v Speaker 2>first Trump administration. Mister Secretary, thank you so much for

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<v Speaker 2>joining us this morning, and you oversaw the Commerce Department

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<v Speaker 2>at a time when economic policy was increasingly becoming a

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<v Speaker 2>national security tool. With this latest action in Venezuela, what

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<v Speaker 2>has changed? Does that become even more apparent as a

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<v Speaker 2>tool for this administration.

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<v Speaker 1>Well, I think it's clear that a lot can be

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<v Speaker 1>done and should be done to change the economics of Venezuela.

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<v Speaker 1>I'm going to give you a few data points. They

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<v Speaker 1>probably have three one hundred billion barrels of oil of

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<v Speaker 1>proven reserves. At fifty dollars a barrel, that's fifteen trillion

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<v Speaker 1>dollars of reserves. So in terms of being able to

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<v Speaker 1>handle the debts that they have, which are substantial but

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<v Speaker 1>are only one hundred and sixty billion, So compare that

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<v Speaker 1>to oil reserves will into the trillions. It should not

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<v Speaker 1>be that bigger problem. The bigger problem is that because

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<v Speaker 1>of poor management, poor maintenance, and running out of parts,

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<v Speaker 1>the oil production has gone down by more than two

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<v Speaker 1>million barrels a day, a fifty dollars a barrel. That

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<v Speaker 1>works out to about thirty seven billion dollars a year

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<v Speaker 1>cost to the economy. Those are huge, huge numbers, especially

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<v Speaker 1>when you consider the whole population is only around twenty

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<v Speaker 1>seven million people because some seven million people have fled

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<v Speaker 1>the country under Maduro. And it's not just oil. There's

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<v Speaker 1>a lot else that can be fixed. For example, agriculture

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<v Speaker 1>is twenty five percent of the land mass of Venezuela,

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<v Speaker 1>but it's only three percent of the economy and only

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<v Speaker 1>ten percent of the labor force. And the reason for

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<v Speaker 1>that is that they don't have fertilizer. Their equipment, tractors

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<v Speaker 1>and reapers and things are pretty well broken down. They

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<v Speaker 1>need spare parts. So there's a lot of stuff that

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<v Speaker 1>can be proved and improved pretty quickly. Agriculture, for example,

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<v Speaker 1>could be brought back very very fast. Venezuela had been

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<v Speaker 1>one of the most verdant soils in all of Latin America,

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<v Speaker 1>and it was one of the reasons why Venezuela was

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<v Speaker 1>as popular and as prosperous as it had been. But wilburt,

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<v Speaker 1>what needs to happen? And they were bringing Colombians in

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<v Speaker 1>to help on the fields because they didn't have enough workers.

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<v Speaker 3>Can I just break in, Wilburn asked, you know, this

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<v Speaker 3>is your specialty. You made your name before you ran

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<v Speaker 3>trade policy for commerce at the cabinet level, negotiating for

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<v Speaker 3>creditors in the biggest names of bankruptcy TWA and Texico

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<v Speaker 3>and Drexel, Burnham Lambert. Then you obviously became the biggest

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<v Speaker 3>rest structuring expert or one of them in the US

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<v Speaker 3>would turn around of massive businesses like US deals. So

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<v Speaker 3>this is what you do. What needs to happen for

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<v Speaker 3>capital to go into Venezuela and do the very same

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<v Speaker 3>What kind of stability, what kind of rule of law,

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<v Speaker 3>what kind of sure prerequisites need to be met?

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<v Speaker 1>Right? Well, there's a lot that needs to be done

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<v Speaker 1>in terms of laws. Venezuela has the weakest property rights

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<v Speaker 1>laws in the whole world, So that has to be

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<v Speaker 1>fixed so that you have some assurance of private sector

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<v Speaker 1>continuing ownership. But I think realistically companies going in now,

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<v Speaker 1>in a relatively complex situation, are probably going to want

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<v Speaker 1>guarantees against expropriation, and that's not unusual. The US and

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<v Speaker 1>multinational entities often give expatriation and foreign ext change guarantees. Now,

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<v Speaker 1>the debt structure is mind bogglingly complicated. They have about

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<v Speaker 1>one hundred and sixty billion of debt altogether, counting expatriation claims,

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<v Speaker 1>counting of funded debt, counting debt for oil, counting everything.

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<v Speaker 1>Those bonds have been trading in the high teen's low twenties.

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<v Speaker 1>They could probably be restructured in the thirty to forty

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<v Speaker 1>cents on the dollar. So in the overall context, that's

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<v Speaker 1>not a very big number. And one of the few

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<v Speaker 1>good things is that the IMF has no exposure to Venezuela,

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<v Speaker 1>and IMF is entitled to lend up to fifty billion dollars,

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<v Speaker 1>so they could very well be a source of some funding.

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<v Speaker 2>On that point, before we continue, Wilburt because some of

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<v Speaker 2>the exposure we do understand comes from China and debt

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<v Speaker 2>owede to Chinese banks. For example, if there is a

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<v Speaker 2>restructuring of debt in the country, do you expect the

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<v Speaker 2>US to exert force of who gets priority in the

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<v Speaker 2>capital stack, does it change where back payments in different

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<v Speaker 2>restructuring comes from. Just given the geopolitics of the moment

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<v Speaker 2>between the US and China.

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<v Speaker 1>Right well, both the Chinese and the Russians had made

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<v Speaker 1>loans to Venezuela that are payable at least partly in oil,

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<v Speaker 1>but oil at very very advantageous prices to them, So

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<v Speaker 1>they are part of the problem in that they're getting

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<v Speaker 1>oil very cheaply out of Venezuela in return for debts

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<v Speaker 1>that otherwise and never going to be paid. Now, the

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<v Speaker 1>oil that comes out of Venezuela is mostly what we

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<v Speaker 1>heavy oil, and that requires a slightly different refining process

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<v Speaker 1>from the American shale oil, which is mostly light oil.

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<v Speaker 1>Both China and India have very strong facilities for processing

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<v Speaker 1>heavy oil because a lot of the Iranian oil that

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<v Speaker 1>they had been getting also is heavy. And in the

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<v Speaker 1>US there are a number of refineries in the southern

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<v Speaker 1>part of the country, particularly the old Sitco refineries, that

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<v Speaker 1>were established from the very beginning, to handle this oil.

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<v Speaker 1>So while it is a little bit different and it's

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<v Speaker 1>a little more costly to refine at anything like fifty

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<v Speaker 1>dollars a barrel. It's still going to be very very cheap,

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<v Speaker 1>I says. The extraction costs in Venezuela, once you've got

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<v Speaker 1>it up and running and with proper equipment, are going

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<v Speaker 1>to be very very low.

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<v Speaker 3>Can I just ask me over We've only got other

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<v Speaker 3>natural reasons. We've only got a minute left here, and

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<v Speaker 3>I want to ask, well.

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<v Speaker 1>It has lots of gold, most of which is not

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<v Speaker 1>being used for lawful purposes.

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<v Speaker 3>Well, speaking of lawful I just want to.

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<v Speaker 1>Ask transport planes every day flying to Iran with Venezuela

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<v Speaker 1>and gold fair.

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<v Speaker 3>We've only got a minute left, and I just want

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<v Speaker 3>to ask you about the precedent risk here. Does removing

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<v Speaker 3>a sitting head of state on criminal grounds create a

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<v Speaker 3>precedent that we have to live with later? Do other

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<v Speaker 3>great powers now reserve that right for themselves as well?

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<v Speaker 1>Well? The whole situation is very complicated. I'm not close

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<v Speaker 1>enough to what's happening on the ground to figure out

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<v Speaker 1>exactly how resolve the political issues. But Secretary Rubio has

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<v Speaker 1>indicated on other television shows over the weekend that perhaps

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<v Speaker 1>the ultimate solution to the governance of Venezuela is new elections,

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<v Speaker 1>and if they are properly supervised, that might well be

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<v Speaker 1>an answer.

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<v Speaker 2>All right, Commer Secretary, I'm sorry to jump in. We

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<v Speaker 2>are just up again the commercial break. Thank you so

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<v Speaker 2>much for joining us, though. That is Wilber Ross, former

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<v Speaker 2>US Commerce Secretary, as we assess the fallout of Nicholas

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<v Speaker 2>Maduro's capture, who's currently on US soil in New York

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<v Speaker 2>facing trials