• Widespread power grid disruptions in Venezuela impact supply chain operations

    25 July 2018

    The nationwide electrical outages due to material and labor shortages that have swept throughout Venezuela over the past month are starting to impact logistics operations in the country. The outages have been coming in the forms of load shedding, rolling blackouts, and planned outages. The state-owned utility firm Corpoelec is the sole provider of electricity in the country outside of Caracas. An increased number of demonstrations by Corpoelec employees in recent months airing grievances against the utility firm’s management and labor capacity shortages have impacted the production of electricity in general. This persistent dispute is beginning to affect transportation and production activities in the country.

    Over the past weeks, electricity rationing and other capacity failures by Corpoelec have resulted in widespread outages in major metropolitan areas across Venezuela, including airport districts of cities such as Maracaibo, the second largest city in the country. More explicitly, this has come to include shutdowns of major international airports themselves, such as the Simon Bolivar International Airport, serving Caracas as well as the country as a whole for air freight movement. State media reported on June 12 a complete cessation of domestic flights to and from Maracaibo as a result of the power outages, simultaneously impacting operations out of Caracas. These developments compound the decrease in domestic air service, down 69 percent since 2014 from near 75,000 annually to 29,000. Earlier outages have been reported in cities such as Puerto Ayacucho and Puerto Cabello, among others. Outages in these localities threaten ocean freight movement as well as production in the oil rich Faje Petrolifera de Orinoco. As for ground transportation, state sources highlight persistent difficulties in terrestrial transport as a result of power outages affecting traffic signaling.

    An evaluation by the Venezuelan Association of Electrical, Mechanical and Professional Engineers estimated that Zulia is the hardest hit, and that a short term measures would do little to return Zulia to its pre-outage capacity. Zulia is unique among Venezuelan states for its concentration of oil fields, pipelines, ports, refineries, and petrochemical complexes within the state alone, all within easy access to ports on Lake Maracaibo or in the Gulf of Venezuela. Maracaibo alone would require 1800-1900 megawatts of generation to return to its past capacity, at which it is only presently capable of 200.

    Compounding the situation are strikes by Corpoelec employees against the utility company in grievance against the additional labor required in the midst of the labor and material shortages, as well as in protest of the deteriorating standard of living that has befallen Venezuela since 2013. The strike starting on July 23 is the most recent in a series of industrial actions over the past year, four of which occurred during the past two months. The cause of the strikes is the material shortages, which has in turn given rise to strikes by Corpoelec employees to pressure the management into alleviating these conditions. Demonstrations have so far appeared in cities and states where the power outages have taken place. Perhaps the most notable development, however, is a gradual coalescing of Corpoelec employees into an organized national strike of electrical workers. There is no indication that a strike, or any immediate concession from the government or Corpoelec on facilitating the resumption of full service, is likely in the near future. Therefore, those conducting business in Venezuela are advised to keep abreast of new developments and, where appropriate, explore alternatives.

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