Oil smuggling brings environmental disaster to Venezuela’s economic ruin

The economic disaster in Venezuela caused by tumbling petrol prices — oil production is the main industry — is also behind an environmental one. Lake Maracaibo, which sustains the Añu indigenous group, is being contaminated by oil spills and the leaky drilling infrastructure, all made worse by rampant gas smuggling. Special correspondent Nadja Drost and videographer Bruno Federico report.

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  • HARI SREENIVASAN:

    We return now to a Venezuela in crisis.

    We recently brought you a report from Caracas on the collapse of the economy and the health care system and the lawlessness run rampant there.

    Tonight, again in partnership with the Pulitzer Center on crisis Reporting, special correspondent Nadja Drost and videographer Bruno Federico report from western Venezuela on Lake Maracaibo. It is the hub of Venezuela's oil industry, the country's lifeblood, which is now a trade in serious trouble.

  • NADJA DROST:

    The drop in oil prices has not just devastated the Venezuelan economy. It's causing an environmental crisis as well. An oil spill that happened in May still covers the shoreline of Lake Maracaibo.

  • JOSE GREGORIO GARCIA, Fisherman (through translator):

    Lately, we have been seeing a lot of oil spills. It wasn't like this before.

  • NADJA DROST:

    Jose Gregorio Garcia is part of the Anu indigenous group, who live in the lake area. Anu means people of the shore, and fishing has long been their sustenance. But leaking oil is damaging their livelihood; 15,000 barrels of oil have spilled into the lake in the last two months, according to the state oil company.

  • JOSE GREGORIO GARCIA (through translator):

    There were species that we don't see now. We think it's because of the contamination.

  • NADJA DROST:

    Shrimp are gone completely, and the lake's once-thriving blue crab fishery is also disappearing.

  • JOSE GREGORIO GARCIA (through translator):

    The oil goes to the bottom of the lake. That's where the crab is. It migrates, or dies, or gets covered with petroleum, and when it's stained like that, no one will buy it.

  • NADJA DROST:

    Oil wells have been abandoned, and production has slowed to a 13-year low. That means money that was supposed to be set aside to stop oil spills has dried up.

    Alfredo Dominguez, who checks oil platforms for the state company which operates all the oil fields, says there's a lack of everything, equipment and the parts to fix it and oversight by management. Plus, thieves have also wrecked the infrastructure.

  • ALFREDO DOMINGUEZ, Field Operator (through translator):

    They rob cables from the oil stations, bulbs, everything that can be melted down. They take apart the tubes. The wells keep pumping and sending the oil to the station, but the cables and tubes have been cut, so the oil ruptures and spills into the lake.

  • NADJA DROST:

    For decades, Lake Maracaibo has been a symbol of Venezuela's oil wealth, but, today, it's in a state of decay. Beneath us, there is a massive network of interlaced tubes transporting oil and gas. Locals refer to it as a bowl of spaghetti.

    But many of these tubes are old and face a lack of maintenance, and they are leaking constantly small quantities of both oil or gas. And the result is this.

    Back when oil was selling at record prices throughout the tenure of the late President and icon here Hugo Chavez, the government used oil revenues to try to transform the country and lift the poor out of poverty, says Carlos Munos Potella, a petroleum economist and an adviser to the nation's central bank.

    CARLOS MUNOS POTELLA, Central University of Venezuela (through translator): It started a policy that wasn't very productive in economic terms, but it was the payment of a social debt.

  • NADJA DROST:

    Under Chavez, oil revenues went increasingly to funding social programs, subsidizing food and building homes for the poor.

  • CARLOS MUNOS POTELLA (through translator):

    It was a revolution financed with oil.

  • NADJA DROST:

    But critics say the government didn't use any of the windfall to maintain oil production. It keeps dropping. Now, with oil prices down, the country has racked up billions in unpaid bills to contractors. Billions more have gone missing in corruption schemes.

    But the oil industry is also bleeding profits to illegal gasoline smuggling rackets. Nowhere is that more evident than a few hours' drive west to the border with Colombia. Old American cars are about all you see in the border towns of what is like Venezuela's Wild West. Shunned for being expensive gas-guzzlers anywhere else, here, their huge tanks are in demand to fill up with cheap gasoline to smuggle across the border.

    It is so heavily subsidized, a gallon costs a mere 3 cents. But across the border, in Colombia, a gallon sells for 90 times that. And it's in that margin of profit that contraband gasoline thrives. The government estimates 100,000 barrels a day are smuggled out. That means smugglers are sucking dry at least $2 billion a year from the country's coffers.

    In order to help prevent that, the border between Venezuela and Colombia closed last year. But smugglers are creating new routes, using unofficial border crossings, and it's on remote back roads like this one that the flow of gasoline continues.

    It starts behind the high concrete walls in the town of Paraguaipoa, where smugglers pool gasoline from various sources, including the tanks of those big American cars. A smuggler agrees to take us on the first leg of his smuggling route, as long as we don't reveal his identity. This is big business, very lucrative, and highly illegal.

    He tells us we can't film outside the truck. If anyone notices us, it can put everyone at risk. This area is filled with armed groups, all of whom have a stake in the racket.

  • SMUGGLER (through translator):

    Sometimes, drivers will be tied up and killed. It happens to helpers, too. Soldiers get shot down, and whoever falls, falls.

  • NADJA DROST:

    In order to traverse this frontier land with their contraband goods, smugglers have to pay off everyone, from authorities to rebels and other armed groups from the Colombian side.

  • SMUGGLER (through translator):

    You pay the military, the national guard, the police, the intelligence agency, military intelligence. You even pay the Colombian guerrillas. Everyone eats from this.

  • NADJA DROST:

    Colombian paramilitaries, too, he says.

  • SMUGGLER (through translator):

    If you don't pay, you will get shot, at the least.

  • NADJA DROST:

    We arrive at a lake, where workers line up empty barrels to tow across, where they will get filled at a rudimentary gas station, loaded onto trucks and continue their journey to the other side of the border. Many people live off this trade, including the military's national guard, who we see inspecting every vehicle, except for trucks with contraband gasoline, at a checkpoint a mere 10 miles before a closed border crossing.

    As we peer out from behind our tinted windows, a local accompanying us explains how contraband gets across here.

  • SMUGGLER (through translator):

    Those civilians are the moscas.

  • NADJA DROST:

    Moscas, flies, the name given to civilians buzzing around on motorbikes who act as a link between smugglers and whichever group they have to pay off. Here, it's the military.

  • SMUGGLER (through translator):

    One of them already arranged everything and paid the military, so that these trucks can pass through.

  • NADJA DROST:

    Truckload after truckload, contraband gasoline is waved on through by the military. Smuggling rackets keep draining oil profits. Oil wells in Lake Maracaibo continue to decline.

    As the oil economy tumbles, and pulls Venezuela deeper into crisis, it draws attention to the perils of over-relying on oil revenues to prop up an economy.

    Back on Lake Maracaibo, fisherman Jose Gregorio Garcia has benefited from oil's bonanza years, as well as suffered from too much oil, contaminating his fish supply. Living shoreside of the once-booming oil industry, Garcia knows it has to change.

  • JOSE GREGORIO GARCIA (through translator):

    We have seen what happens with petroleum. The price of oil rises, and it falls. We have always lived off this, the good price of oil. But we have to find an alternative.

  • NADJA DROST:

    For the "PBS NewsHour," reporting with Bruno Federico, I'm Nadja Drost on Lake Maracaibo.

  • HARI SREENIVASAN:

    To hear more about this story and our reporting from Venezuela, check out our Outside the Bubble conversation with special correspondent Nadja Drost. That's on our Facebook page, Facebook.com/NewsHour.

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