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Located in an isolated savanna in the center of the country,
Atapirire is the only town in an area the government says is
brimming with 5 billion barrels of petroleum. Venezuela has
pledged those reserves as backing for a digital currency dubbed
the "petro," which Maduro launched in February. This month he
vowed it would be the cornerstone of a recovery plan for the
crisis-stricken nation.
But Atapirire residents say they have seen no efforts by the
government to tap those reserves. And they have little
confidence that their struggling village has a front-row seat to
a revolution in finance.
"There is no sign of that petro here," said homemaker Igdalia
Diaz. She launched into a diatribe about her town's crumbling
school, pitted roads, frequent blackouts and perpetually hungry
citizens.
It turns out that Venezuela's petro is hard to spot almost
anywhere. Over a period of four months, Reuters spoke with a
dozen experts on cryptocurrencies and oil-field valuation,
traveled to the site of the pledged oil reserves and scoured the
coin's digital transaction records in an effort to learn more.
The hunt turned up little evidence of a thriving petro trade.
The coin is not sold on any major cryptocurrency exchange. No
shops are known to accept it.
The few buyers Reuters could locate were those who had posted
about their experiences on online cryptocurrency forums. None
would identify themselves. One complained of being "scammed."
Another told Reuters he had received his tokens without problem;
he blamed U.S. sanctions against Venezuela and "awful press" for
hurting the petro's debut.
Senior government officials have given contradictory statements.
Maduro says petro sales have already raised $3.3 billion and
that the coin is being used to pay for imports. But Hugbel Roa,
a cabinet minister involved in the project, told Reuters on
Friday that the technology behind the coin is still in
development and that "nobody has been able to make use of the
petro ... nor have any resources been received."
The Superintendence of Cryptoassets, the government agency that
oversees the petro, is a mystery. Reuters recently visited the
Finance Ministry, where the Superintendence is supposed to be
housed, but was informed by a receptionist that it "does not yet
have a physical presence here."
The Superintendence's website is not functioning. Its president,
Joselit Ramirez, did not respond to messages on his personal
social media accounts. Phone calls to the Industry Ministry,
which oversees the agency, went unanswered.
The Information Ministry did not reply to emails seeking
comment.
Maduro added to the confusion this month by announcing that
salaries, pensions and the exchange rate for Venezuela's
decimated currency, the bolivar, are now pegged to the petro.
That move stirred bewilderment on Venezuela's streets and among
economists and cryptocurrency experts who say the petro-bolivar
tether is unworkable.
"There is no way to link prices or exchange rates to a token
that doesn't trade, precisely because there is no way to know
what it actually sells for," said Alejandro Machado, a
Venezuelan computer scientist and cryptocurrency consultant who
has closely followed the petro.
The chaos speaks to the desperation and disorganization that are
gripping Maduro's government as Venezuela melts down.
The petro was supposed to help his administration weather the
hyperinflation that has rendered the bolivar all but worthless.
He vowed that a cryptocurrency, which allows financial
operations to be carried out anonymously, would enable Venezuela
to undermine U.S. financial sanctions and raise hard currency.
The government pegged the value of the petro to the price of one
barrel of Venezuelan oil - currently around $66 - and promised
to back it with crude reserves located in a 380-square-kilometer
area (147 square miles) surrounding Atapirire. U.S. President
Donald Trump in March banned Americans from buying or using the
petro.
Analysts are skeptical of Maduro's claims that the petro has
already brought in billions in hard currency. They say digital
records associated with the initial coin offering, or ICO, do
not provide enough information to determine how much, if
anything, has actually been raised.
"This certainly doesn't look like a typical ICO, given the low
level of transaction activity," said Tom Robinson, chief data
officer and co-founder of Elliptic, a London-based blockchain
data company. "We have found no evidence that anyone has been
issued a petro, nor of it being actively traded on any
exchange."
A visit by Reuters to the area around Atapirire, meanwhile,
showed little oil-industry activity. The only visible rigs were
small and aging machines installed years ago. Several were
abandoned and covered in weeds.
In an opinion piece posted August 19 on Aporrea, an online
Venezuelan commentary and analysis site, former Oil Minister
Rafael Ramirez estimated it would take at least $20 billion in
investment to tap the reserves, money that Venezuela's troubled
state-owned oil company PDVSA does not have.
"The petro is being set at an arbitrary value, which only exists
in the government's imagination," Ramirez wrote. He oversaw the
nation's oil industry for a decade under late President Hugo
Chavez. Ramirez is now in exile in an undisclosed location after
being accused of corruption by the Venezuelan government,
allegations he denies.
PDVSA did not respond to an email seeking comment.
'WE GOT SCAMMED'
In contrast to buyers of well-known cryptocurrencies such as
Bitcoin or Ethereum, holders of petros are difficult to find.
One gathering place is an online cryptocurrency forum called
Bitcointalk, where enthusiasts began posting messages in early
2018.
Some initial posts were bullish. But that optimism soured as
time went on. Several participants groused about a lack of
information and delays in getting their coins. One complained of
being unable to transfer or sell the tokens.
"As of now yes we got scammed, time will tell if it was a good
investment or not," a forum participant identified as
cryptoviagra wrote on June 25.
Another buyer, the only one to respond to questions from
Reuters, said via social-media messages that his experience
purchasing petros "worked pretty well overall." He blamed the
U.S. ban for depressing petro sales, along with what he
considered negative media coverage. He asked that his name be
withheld because he feared "persecution" by the U.S. government,
adding that "I don't consider Reuters to be a honest news
organization."
Reuters could not independently confirm whether any forum
participants had invested in the petro.
Cryptocurrencies gained popularity over the last decade, led by
proponents who said they would lower financial transaction
costs, give citizens alternatives to commercial banks and
protect them from inflation induced by central-bank policies.
Transactions are validated by a network of computers and
recorded on a public ledger called a blockchain. Individual
operations are available for anyone to see on the internet, but
the identities of those involved are kept secret. The operations
are secured by cryptography, the computerized encoding and
decoding of data.
Fevered purchases of crypto assets in 2017 drove Bitcoin's price
to nearly $20,000. Its success fueled a wave of coin offerings
by other startups, including scams that raised millions of
dollars before being broken up by authorities.
Cryptocurrency issuers seeking to provide transparency in
fundraising use blockchain ledgers to show each individual
purchase of the new currency. That gives potential investors a
sense of how much money is flowing in, and provides a relative
gauge of demand.
The Venezuelan government, in contrast, has not provided a
purchase registry.
The petro's "white paper," a public document that describes the
conditions of the offer to prospective buyers, says the
principal platform for the coin is NEM - a decentralized
blockchain network promoted by a Singapore-based non-profit.
Owners of NEM accounts are anonymous, but can disclose their
identities in the description of their coins if they wish.
In March, a NEM account claiming to be operated by the
Venezuelan government issued 82.4 million tokens as part of an
ICO associated with a digital coin described as the petro. Those
appeared to correspond to a set of "preliminary" coins described
in the white paper that buyers could later swap for petros once
the ICO was complete.
Around 2,300 of those tokens were transferred to 200 anonymous
accounts in small quantities in early May, NEM records show.
That time frame is consistent with comments posted by
participants on the Bitcointalk forum who said they were buying
petros. If sold at the price set by Maduro based on oil prices
at the time, the sale of those tokens could have raised about
$150,000, according to Reuters' calculations.
In April, another anonymous NEM account issued a different set
of tokens that it described as part of a separate phase of the
petro aimed at major investors.
That account in June transferred a total of around 13 million
tokens to about a dozen anonymous accounts, NEM records show.
The sale of those tokens could have raised about $850 million at
official prices. But there is no way to verify that those were
sales, and no large investors have admitted to taking a position
in the petro.
Roa, the higher education minister, oversees a state agency
called the Venezuelan Blockchain Observatory. He appeared to
validate analysts' suspicions that the petro, at present,
doesn't exist as a functioning currency.
Reuters spoke with him briefly on the sidelines of a petro event
in Caracas last week. Roa described the NEM transactions as
"early models," adding that Venezuela was now working on its own
blockchain technology. He said buyers have made "reservations"
to purchase petros, but that no coins have been released.
What is clear is that the petro does not trade on any major
cryptocurrency exchange.
Hong Kong-based Bitfinex, one of the world's largest exchanges
by volume, in March said it never intended to list the petro due
to its "limited utility." It officially banned the token from
its platform following U.S. sanctions.
Three other major exchanges - San Francisco-based Coinbase,
Seattle-based Bittrex and San Francisco-based Kraken - declined
to comment or did not respond to questions as to why they have
not listed the petro.
Maduro on April 26 announced that 16 exchanges had been
"certified" to trade the petro, adding "they begin operating as
of today." Most are little-known in the crypto world.
Reuters could not locate seven of the exchanges, which had no
internet presence. Seven others did not respond to requests for
comment. Italcambio, an established Venezuelan currency exchange
that Maduro said would trade the coin, does not manage or sell
petros, its president Carlos Dorado said in an emailed response
to Reuters.
The only exchange that has publicly discussed plans to list the
petro is India's Coinsecure.
In an interview with Reuters earlier this month, CEO Mohit Kalra
said Coinsecure within two months would provide Venezuela with
an exchange for trading petros, along with technology to operate
it, and that Venezuela would pay royalties for its use.
Kalra did not answer calls seeking additional information.
'WHAT IS A PETRO?'
Oil is the heart of Venezuela's economy. In choosing to back its
petro with petroleum, the country has joined a small but growing
number of cryptocurrency issuers linking the value of their
tokens to physical commodities.
The Royal Mint, which produces coins for the United Kingdom, in
2017 announced a gold-backed digital coin called RMG. Other
tokens have emerged that are backed by diamonds.
The big difference is those cryptocurrencies are tied to
physical assets that can be readily traded. In contrast, Maduro
promised that the petro would be backed by oil reserves that
still lie deep underground near Atapirire in a bloc known as
Ayacucho I.
The government says the area holds 5.3 billion barrels, citing
an "independent international certification agency." PDVSA did
not answer an email seeking details.
No matter how much oil it holds, the area lacks crucial
infrastructure to get it out of the ground, including roads,
pipelines and power generation, said Francisco Monaldi, a native
of Venezuela who now teaches Latin American energy policy at
Rice University in Houston.
"There is no investment plan for this area and no reason to
think it would be developed before other fields with better
conditions," he said.
Just locating the bloc requires significant effort.
PDVSA employees who agreed to take a reporter there confused it
with a different bloc. Reuters had to map Ayacucho I with GPS
software using coordinates published by the government as part
of the petro's creation.
Meanwhile in Atapirire, residents say they have been forgotten.
A fish farm that used to provide employment now lies abandoned.
The town's clinic has no doctor or functioning ambulance. Many
spend hours waiting along the dusty road for Chinese-made buses
that serve as the only public transit into El Tigre, an
important oil hub that lies 60 kilometers (37 miles) to the
north.
Teacher Rosa Alvarez said that around half of her first-grade
class had stopped showing up because they were hungry and the
school no longer provides state-sponsored meals.
She says government officials have ignored her complaints. But
in May the Education Ministry laid out a new mandate: Teach
students about the virtues of Venezuela's new cryptocurrency.
Standing before a white board earlier this year as her students
giggled and chatted, Alvarez said she was stumped.
"How am I going to explain that to them if nobody will tell me
what is a petro?" she said. "How do I buy a petro? With what?"
(Additional reporting by Anna Irrera in New York, Nidhi Verma in
New Delhi and Maria Ramirez in Altagracia del Caris; Editing by
Marla Dickerson)
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