March 6, 2020 / 12:22 AM / a month ago

Mexican firm takes millions of barrels of Venezuelan crude in oil-for-food swap

MEXICO CITY (Reuters) - Venezuela has swapped millions of barrels of crude for supplies of corn and water trucks under an oil-for-food deal struck with a Mexican firm, in an effort to secure imports amid tightening U.S. sanctions, according to the company and export schedules.

The privately owned Mexican firm, Libre Abordo SA, which has no previous experience in the oil sector, has emerged as a major lifter of Venezuela’s crude as the state-run oil company PDVSA has seen its portfolio of customers dwindle due to sanctions aimed at ousting socialist President Nicolas Maduro.

Libre Abordo has so far taken 6.2 million barrels of Venezuelan heavy crude for resale in international markets and has two more cargoes of oil and fuel due to be loaded this month, according to PDVSA export programs reviewed by Reuters.

In a statement sent to Reuters, Libre Abordo said it had signed a contract last year to export Mexican corn and water trucks to Venezuela in return for supplies of oil and that the contract was still in effect.

The company said it had consulted lawyers concerning the transaction and had been advised that there was no violation of the U.S. sanctions as there were no cash payments involved because the oil was received to offset food aid.

Sunken in years of hyperinflation, economic recession and hunger, Venezuela has struggled to afford imports of everything from food to medical supplies. Millions of Venezuelans have emigrated amidst widespread shortages.

Libre Abordo declined to disclose the name of the legal firm that provided the advice but it furnished a copy of the text for Reuters to review.

“Based on the information we have received, it appears that Libre’s acquisition of title to PDVSA cargo in satisfaction of the pre-existing debt obligations occurred entirely outside of U.S. primary sanctions jurisdiction,” the lawyers said in their analysis.

The U.S. Treasury department, PDVSA and the Venezuelan government did not immediately reply to requests for comment.

CORN AND TRUCKS

The contract between Libre Abordo’s Mexican owners - Olga Zepeda and Veronica Esparza - and the Venezuelan government came into effect last year and no intermediaries were used for negotiations, the company said.

“These are not buy-sell contracts,” the company said. “Libre Abordo has been very cautious. The contract is considered humanitarian aid.”

The company said it expects to complete delivery of 210,000 tonnes of white corn and 1,000 water trucks in the coming months, while receiving oil in exchange.

The contract does not have a deadline so new products to be exchanged could be agreed between the parties, Libre Abordo said.

Oil cargoes received under the deal are being immediately resold and the buyers are taking possession of them at PDVSA’s ports with no information provided to Libre Abordo on the final destination or use, the company said.

A check of Mexican registries by Reuters showed it was formed about a decade ago and its trade activities registered a sudden increase last year. Its webpage was created in 2019.

As the United States increases pressure on Maduro, it has backed an interim government led by the congress head, opposition leader Juan Guaido.

Many governments have called on Washington to ensure that sanctions avoid deepening Venezuela’s humanitarian crisis.

Several food suppliers to Venezuela were sanctioned by Mexican authorities in 2018 over allegations of over-pricing and poor quality of the products sold. The companies were fined and ordered to suspend exports to Venezuela.

Libre Abordo is not related to these firms, the company said.

Reporting by Marianna Parraga and Ana Isabel Martinez; Additional reporting by Adriana Barrera and Noe Torres in Mexico City and Timothy Gardner in Washington; Editing by Dan Flynn, Leslie Adler and Muralikumar Anantharaman

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