HANOI – What does the Venezuelan domestic payments crisis have in common with the death of the North American Free Trade Agreement, announced by Wilbur Ross, US President-elect Donald Trump’s pick to be the next US Secretary of Commerce? These two seemingly disparate events are linked by the odd relationship with the truth that both Trump and the Chavista regime seem to share.
All governments lie. A few believe their own lies. But things get dangerous when they act in order to be true to their lies. That is the trap into which Venezuelan President Nicolás Maduro’s government has fallen, and it seems to be the logic behind the decision articulated by Ross to withdraw from NAFTA.
Many observers have noted similarities between Trump and Maduro’s predecessor, the late Hugo Chávez, even though they represent opposite ends of the political spectrum. But our brains are designed to identify patterns. Toddlers learn the concept of a cat by being shown just a handful of exemplars. Even adults classify things based on concepts that we cannot really define. In 1964, US Supreme Court Justice Potter Stewart stated his now famous criterion of obscenity: “I know it when I see it.”
That certainly seems true of the connection between Chávez (who died in 2013) and Trump. Chávez, and then Maduro, adopted policies that put Venezuela in a very weak position: lavish spending, expropriation, price and foreign-exchange controls, and reckless borrowing abroad. Global capital markets lost confidence in Venezuela in 2013, and the price of oil plummeted in 2014, making these policies unsustainable and sending the economy into a tailspin.