Fueling Free Markets in South America
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It’s simple. When we engage economically with other nations we export freedom. Brazil’s turn away from engagement with China towards the United States is a great current example of that. We’re going to see the same thing happen, incredibly, in Venezuela if the U.S. steps up to implement an economic engagement strategy that does not cede all economic engagement with that troubled nation to China and Russia.

As a fairly politically active person who generally likes President Donald J. Trump, I believe that an America First policy of economic engagement with nations in turmoil demonstrates in real time that the companies borne of the free market are far superior in every way to the government-subsidized, crony-filled companies that are produced by Russia and China. Venezuela is run (at the moment) by anti-American socialist Nicolas Maduro who is under fire for allegations that his election was rigged, yet the nation’s state-owned oil company is open to the U.S having a presence in the country. Politics and rhetoric aside, it well knows that U.S. participation will efficiently help the nation to extract oil better than the alternatives. A classic case of self-evangelizing free markets trumping socialism — and a great way for the U.S. to export a healthy dose of economic freedom to South America just as our friends to the south need it most.

Economic engagement that boxes out a Chinese government that cheats on trade deals and a Russian government that is using loans and schemes to leverage military relations is always in the United States’ national interest. The America-First policy that has been pushed by President Trump and Treasury Secretary Steven Mnuchin is consistent with this concept going forward. Any such deal would need to be approved by the Treasury Department’s Office of Foreign Asset Control (OFAC) and likely would be because it turns the screws on America’s traditional economic (and of course military) competitors.

Again, look to Brazil, where the people just rejected the Workers’ Party by electing a pro-Western President Jair Bolsonaro who was sworn in earlier this month. That nation was going down the road of Venezuela with a strongman leadership situation that only led the nation into higher crime and more rampant poverty.

Before the change over from socialism to a government that will privatize many of the big oil companies in Brazil, the country was on the fast track to economic stagnation. The Heritage Foundation’s Index of Economic Freedom found that the nation’s “economy (was) the 153rd freest in the 2018 Index” and the country’s score “decreased by 1.5 points, with a steep drop in fiscal health and declines in labor freedom, business freedom, government spending, and government integrity overwhelming improvements in judicial effectiveness and property rights.” That was all under the corrupt socialist government. The regional score for South America had Brazil tumbling towards the stagnation being experienced by Venezuela.

A Venezuelan state-owned oil company is diversifying the economy from a focus on Russia and China to one company in the U.S. that is working to efficiently extract oil. This is a hopeful spark that could, considering the current climate, quickly spur a wildfire. The Russians signed an agreement to take control over 49.9% of Citgo, a company in the U.S., from the Venezuelan government. The Washington Post reported that Maduro announced “Russia agreed to invest an additional $5 billion to improve Venezuelan oil production — much of which goes to Russia’s export customers — and $1 billion in gold mining. Separate contracts were signed to supply Venezuela with 600,000 tons of Russian wheat and to modernize and maintain its Russian-made weaponry.” The Russians are taking a big economic hit on these deals because they want to leverage these deals into a strong military presence in Venezuela.

China provides a different threat. In September of last year, the Chinese acquired 10% in an oil venture that gives Venezuela a controlling share of the Chinese-owned company, Sinovensa. Reuters reported in December of last year, “China has lent over $50 billion to Venezuela through oil-for-loan agreements over the past decade, securing energy supplies for its fast-growing economy. But the financing dried up as the South American country’s economy began spiraling downward in 2015, pressured by plummeting oil prices.” China is playing the long economic game, as it does, with Venezuela to wrestle control of oil extraction.

The current deal that will help open up Venezuela to U.S. economic engagement is with the American company Erepla. Bloomberg reports “an agreement with U.S.-based Erepla Services LLC, created in 2018, to boost production at the Tia Juana and Rosa Mediano and Ayacucho 5 fields in exchange for half the oil produced, according to documents seen by Bloomberg. Erepla will supply rigs and crews in the onshore fields for 25 years, with an option to extend for another 15 years, according to the contract.”

This is a good deal for us, and a good nudge toward a free and prosperous Venezuela.

Christian Josi is a veteran of international center-right/libertarian politics, and a frequent columnist for a variety of publications. He is the Founder and Managing Director of C. Josi & Company, a global communications resource firm based in Virginia Beach and Washington.

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