Venezuela is widely reported to be under the very real threat of economic, political and financial disaster. At almanis.com, we’ve asked the crowd to forecast the probabilities of a Venezuelan sovereign default, the removal of President Maduro, and the temporary shutting down of the Guri Hydroelectric Dam. It’s not my intention to offer my own forecasts here, but rather to offer some background for those who might be thinking of doing so.
I’m going to start with the Guri Dam in this post, firstly because it is the most pressing issue of the three. The Dam’s turbines are reported to be close to shutting down and electricity usage is already being frantically rationed in order to prevent it doing so.
This facility provides 60% of Venezuela’s energy needs and 75% of the needs of her capital Caracas. Given this, I think it’s fair to assume then that if Guri’s turbines stop turning, little else would keep going in Venezuela. The near total loss of electricity in a city like Caracas, already suffering from food shortages and rationing, could lead to severe social breakdown. The continuation of sovereign debt payments and democratic process would, in these circumstances, likely be the least of most people’s worries.
How close are we to a Guri Dam shutdown? Miguel Lara, a former director of Venezuela’s power grid quoted by Bloomberg, has stated that if the reservoir sinks below 240m “vortexes can form and damage the turbines”. Despite extensive emergency energy rationing to keep the reservoir above that level, data from Corpoelec, the state-run power company, shows that it was perilously balanced at 241.57m on 2nd May 2016, see chart below.
After two years of drought, what the Guri Dam needs, according to some reports, is rain. It seems to be getting some now, but perhaps too little too late. A little bit of digging gets me to Stephen Gibbs, a reporter for The Economist magazine living in Caracas, who offers some updates above and beyond what I can find in the mainstream media. On Monday 2nd May he tweeted: “Heavy rain appears to have raised level of Venezuela’s Guri Reservoir 11cm in 24 hours.” There’s a fair bit of rain expected in the region for the rest of this month too.
But 11cm of rain in 24hrs isn’t “heavy rain”. It’s a big old storm. The all-time record rainfall in a 24hr period over here in the notoriously soggy United Kingdom is 34cm. If the Guri reservoir level is changing that much in a day, taking Gibbs’ sources at face value, I’d guess it might have more to do with energy demand, the consequent flow of water through the turbines and/or structural matters.
What are the chances of the water falling further? There’s plenty of information out there to dig out if you want to get ahead of the crowd.