Venezuela’s foreign policy might have started out as an idealistic socialist project to revitalize Latin America, but it has morphed into an enormous criminal conglomerate that operates in multiple countries with dozens of partners and hundreds of phantom companies, according to a new study.
A report prepared by the National Defense University and Washington-based IBI Consultants argues that Venezuela’s Nicolás Maduro essentially leads a political-criminal enterprise that has siphoned billions of dollars from the Venezuelan economy.
The study, titled “Maduro’s Last Stand — Venezuela’s Survival Through the Bolivarian Joint Criminal Enterprise,” also sheds light on why escalating U.S. economic and financial sanctions on Maduro and his allies have failed to dislodge them.
The report’s authors argue that the network unites companies, regional structures and Venezuelan political allies in a variety of criminal operations ranging from corruption, money laundering, drug trafficking and gold smuggling.
According to IBI’s calculations this criminal “network of networks” racked up between $10 and $43 billion in revenue between 2007 and 2018, most of which was spirited out of Venezuela through various money-laundering schemes, often with the help of the political leadership in places like Cuba, Nicaragua, Bolivia, Ecuador, Suriname and El Salvador.
“This alliance of Bolivarian states together with the FARC [the now defunct Revolutionary Armed Forces of Colombia] have coalesced into what we define as the Bolivarian Joint Criminal Enterprise — or a consortium of criminalized states and non-state actors working in concert with shared objectives,” the report found. “Unless the network is attacked from multiple points simultaneously, the alliance will survive and morph into a more dispersed and sophisticated operation.”
The study, written by Douglas Farah and Caitlyn Yates, is the result of a five-year investigation in 11 countries.
The late President Hugo Chávez planted the seeds for the criminal enterprise when he transformed the state-run PDVSA oil company into one of his principal foreign policy tools — offering his ideological allies in the region subsidized fuel and financing for infrastructure projects. But the opaque nature of the transactions fueled corruption, and over the past two decades, those alliances have spawned hundreds of phantom companies that were used as cover for illicit operations, the study contends.
According to the authors, the criminal conglomerate not only stole billions of dollars from the coffers of the Venezuelan state, but used PDVSA and its foreign subsidiaries as the central structure for money laundering and corruption throughout Latin America.
Among the activities identified were massive infrastructure projects that never materialized, fictitious oil sales, sweetheart and opaque loans and the purchase of physical assets.
“In total we identified 181 individuals and 176 companies operating in at least 26 countries. The sum of this criminal action is not fully known, but a recent investigation by a Latin American journalist consortium found that Venezuela siphoned $28 billion out of PDVSA,” the report found. “We have traced at least $10 billion in Venezuela-related funds that moved through this criminal network between 2007-2018.”
Maduro inherited the operation in 2013, after Chávez died due to an undisclosed form of cancer, and has been forced to diversify the enterprise as oil prices and PDVSA’s output fell.
“Such conditions forced incoming President Nicolás Maduro to rely even more on activities like cocaine trafficking and illicit gold production, but even with PDVSA’s decline the regime continues to function as a criminal operation,” the study found.
Venezuelan officials have couched PDVSA’s foreign activities as part of the nation’s focus on international solidarity and aid. The country has provided billions in subsidized crude to countries in the Caribbean and Central America as part of its PetroCaribe program. It has also acknowledged that some of its programs have been hampered by corruption. Transparency International ranks Venezuela as one of the most corrupt countries in the world, on par with Iraq and Burundi.
In a telephone interview, Farah said the sprawling nature of the organization means U.S. sanctions also have to be broad and widespread in order to make an impact.
“What we argue in the report is that it is really a joint criminal enterprise between multiple states, and unless you go after multiple nodes of their financing simultaneously, they can play this endless shell game to move their money around and acquire it without ultimately running out of money for a while — a long time,” he said.
The criminalization of the Venezuelan regime has had a dramatic impact on everyday Venezuelans, as the economy has shrunk by more than 50 percent and about 10 percent of the population has fled the country in recent years.
One of the key conclusions of the report is that the Venezuelan regime for years used the corruption derived from the huge oil revenues to favor its political allies in other countries, including Nicaragua and El Salvador.
Interviews with people close to Alba Petróleos determined that the Salvadoran branch of PDVSA received virtually no oil between 2010 and 2017, nevertheless it recorded revenues of approximately $200 million per year, totaling around $1.2 billion over the time examined.
In Nicaragua, Albanisa, also a subsidiary of PDVSA, received some oil, but the funds it received far exceeded imports. In the case of Albanisa, the money provided totaled between $400 and $600 million a year, or between $4 billion and $6 billion in illicit funds during the last decade.
The Venezuelan funds received by these Central American companies represented between 15 and 20 percent of the national budget and were used to benefit Caracas’ political allies — giving them a huge advantage over their rivals and internal opponents, the study found.