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Latin America & Caribbean

US tightens the screws on Venezuela’s Maduro with banking sanctions

US official says cumulative sanctions have Venezuela in a "Darth Vader" style grip around the throat. The new sanctions come in response to the detention on Thursday of interim president Juan Guaido’s chief of staff, Roberto Marrero.
22 Mar 2019 – 04:41 PM EDT
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West Palm Beach, Florida - The Trump administration on Friday announced new sanctions against the Venezuelan banking sector in the latest ramping up of punitive economic measures designed to topple the increasingly isolated government of Nicolas Maduro.

Trump’s National Security Director, John Bolton, put "the entire banking sector" on notice after the Treasury Department announced that "persons operating in Venezuela’s financial sector may be subject to sanctions."

It's first target was the Venezuelan state-owned development bank, BANDES, (Banco de Desarrollo Economico y Social de Venezuela), as well as four financial institutions that BANDES owns or controls. BANDES has handled large Chinese investments and also operates dollars accounts via a branch in Uruguay.

In early 2019, Maduro tried to move over $1 billion dollars out of Venezuela via BANDES to its subsidiary in Uruguay, the Treasury Department said.

Bolton told Univision in an exclusive interview that the sanctions were in response to the arrest earlier in the week by Venezuelan security services of Roberto Marrero, the chief of staff of interim president Juan Guaido, who claims to be the country’s legitimate constitutional ruler and is backed by a large international coalition led by the United States.

“This act of repression by the Maduro regime is a big mistake by them. We have warned them as clearly as we could that they need to do nothing that interferes with the interim government’s operations … We were not bluffing,” Bolton said. “Our aim is to bring this crisis to a conclusion quickly for the benefit of the Venezuelan people to get the Maduro regime to peacefully transiton to the Guaido regime so that we can have free and fair elections,” he added.

Bolton spoke to Univision prior to hosting a meeting of several Caribbean leaders to discuss the regional impact of the crisis in Venezuela, among other issues.

The targeting of the banking sector comes on top of sanctions against Venezuela’s state-owned oil monopoly, PDVSA, as well as top military officers linked to human rights abuses, drug trafficking and money laundering.

Sanctions like "Darth Vader"

“The effect of the sanctions is continuing and cumulative. It’s sort of like in Star Wars when Darth Vader constricts somebody’s throat, that’s what we are doing to the regime economically,” said one senior Trump administration official who briefed a small group of reporters on Friday.

While the impact of the banking sanctions was not immediately clear, several experts consulted by Univision aid they would surely have a chilling efefct on international financial dealings with Venezuela, potentially closing Maduro off from much needed cash flow from oil exports. Venezuela has the world’s largest proven reserves of oil and gas and relies on its petroelum exports for 90 percent of its income.

“It sounds like they want to make Venezuela radioactive,” said Russ Dallen, managing director of Caracas Capital, a Venezuela-based boutique investment bank. “They want to choke off the money flow,” he added.

Dallen noted that several large private Venezuelan banks operate in the United States, including Banco Mercantil and Banesco, but they were not targeted by Friday's announcement.

"These new sanctions will surely have a chilling effect on anyone with financial dealings in Venezuela," said Eric Farnsworth, vice president of the Council of the Americas. "However, the impact could be muted somewhat by forcing some banking transactions to go underground making them harder to track," he added.

Corruption cases

Two former BANDES executives have been convicted of corruption in U.S. courts in recernt years. Alejandro Andrade, its former president between 2008 and 2010, who went on to be the nation's Treasurer, pleaded guilty in Florida court in 2018 to accepting multi-million dollar bribes. He is serving a 10-year sentence.

Another ex-vice president of BANDES, María de los Ángeles González, was also convicted of bribery in 2013, in New York federal court.

“The willingness of Maduro’s inner-circle to exploit Venezuela’s institutions knows no bounds. Regime insiders have transformed BANDES and its subsidiaries into vehicles to move funds abroad in an attempt to prop up Maduro," Treasury Secretary Steven T. Mnuchin, said in a press release.

"Maduro and his enablers have distorted the original purpose of the bank, which was founded to help the economic and social well-being of the Venezuelan people, as part of a desperate attempt to hold onto power."

The Maduro government did not immediately respond to the sanctions.


The latest sanctions appeared to be designed to choke off a recent effort by the Maduro government to lure cash remittances sent by Venezuelan expats away from an informal black market sector into the state-owned banking system, said Dallen. The government recently raised the official exchange rate making it more attractive to Venezuelans who rely on remittances sent from abroad as an economic lifeline.

While hard data is not available, it is estimated that Venezuelan migrants abroad are remitting about $2 billion from at least six countries, mostly from the United States and Colombia, according to the Inter-American Dialogue, a Washington-based think tank.

U.S. banking sanctions are a potential nightmare for Venezuelans and, if expanded as Bolton implied Friday, could potentially impact credit card transactions for Visa and Mastercard holders dealing with the Venezulan banking system. In the inflation-wracked economy, many Venezuelans now avoid cash like the plague in favor of plastic.

Nearly 20 years after the late Venezuelan President Hugo Chavez launched a controversial socialist revolution, Venezuela is in economic freefall, food and medicines are scarce and unaffordable, hyperinflation is running at an annual rate of nearly one million percent and roughly three million Venezuelans have fled the country.

Under U.S. law, sanctions against foreign entities are limited to U.S. persons and corporations with dealings in the affected country. However, their reach can be very extensive as the sanctions cover potentially any transaction in U.S. dollars. More than 90 percent of the world’s oil deals are brokered in U.S. dollars, making the Venezuela sanctions especially damaging.

Venezuela has already begun to explore oil deals in Euros as well as non-cash barter trades, but this would greatly reduce the appeal, and financial value, of its oil exports. “That could be very untenable over time,” said one U.S. oficial, who spoke to Univision on condition of anonymity.