El colapso de Venezuela no tiene precedentes

Jul 31, 2017 Ricardo Hausmann

CAMBRIDGE – El 16 de julio se celebró un plebiscito en Venezuela, organizado apresuradamente por la Asamblea Nacional, en la cual la oposición tiene mayoría. Su objetivo era rechazar el llamado del presidente Nicolás Maduro a formar una Asamblea Nacional Constituyente. En este evento, más de 720.000 venezolanos votaron en el exterior. En la elección presidencial de 2013, solamente lo hicieron 62.311. Cuatro días antes del referendo, 2.117 postulantes rindieron el examen para obtener su licencia médica en Chile. De estos, casi 800 eran venezolanos. Y el sábado 22 de julio, se reabrió la frontera con Colombia. En un solo día, 35.000 venezolanos cruzaron el estrecho puente entre los dos países para adquirir alimentos y medicamentos.

Es evidente que los venezolanos quieren escapar, y no es difícil entender por qué. En todo el mundo los medios de comunicación han estado informando acerca de Venezuela, documentando situaciones verdaderamente terribles, con imágenes de hambre, desesperación e ira. La cubierta de la revista The Economist del 29 de julio lo resume así: "Venezuela en caos".

Pero, ¿se trata simplemente de otra aguda recesión cualquiera o de algo más grave?

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Ricardo Hausmann

Writing for PS since 2001
72 Commentaries

Ricardo Hausmann, a former minister of planning of Venezuela and former Chief Economist of the Inter-American Development Bank, is Director of the Center for International Development at Harvard University and a professor of economics at the Harvard Kennedy School. He has recently been appointed as Governor of Venezuela at the Inter-American Development Bank by Interim President Juan Guaidó.

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0 Comments on this paragraph, 25 in all 25 Comments on this article

Peter Chowla Aug 7, 2017

"Put another way, Venezuela’s economic catastrophe dwarfs any in the history of the US, Western Europe, or the rest of Latin America. "

That is completely incorrect. Greek GDP decline from 2008 peak to 2015 trough was 45%. The author really should check facts before making hyperbolic claims of something being the worst ever!

"No country has a larger public external debt as a share of GDP"

Again incorrect - Greek debt-GDP ratios of 180% are much higher than the estimates on Venezuela which put it (with great uncertainty) in the 100-120% range.
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Alan M Aug 7, 2017

Unprecedented... if you don't count The Soviet Union: Armenia, Azerbaijan, Belarus, Estonia, Georgia, Kazakhstan, Kyrgyzstan, Latvia, Lithuania, Moldova, Russia, Tajikistan, Turkmenistan, Ukraine, and Uzbekistan.

And we won't bring up other countries like Afghanistan, Cambodia, Mongolia, and Yemen.

Of course we can simply omit Soviet-controlled Eastern bloc countries like Bulgaria, Czech Republic, Germany (East), Hungary, Poland, Romania, Slovakia.

Also, let's just ignore the Balkan states where communism utterly failed as it did in Albania, Bosnia and Herzegovina, Bulgaria, Croatia, Rep. of Macedonia, Montenegro, Serbia, and Slovenia.

Oh, and there's really no need to bring up African countries where communism was yet again an unmitigated disaster, such as Angola, Benin, Dem Rep. of Congo, Ethiopia, Somalia, Eritrea, and Mozambique.

So yeah...other than those countries & the fact that the 5 current commie states (China, Cuba, Laos, North Korea, and Vietnam) are piss-poor dumps only kept alive by outside support or by quietly abandoning their failed policies in favor of free trade, then YES:

It sure is a shock that Venezuela is experiencing this "unprecedented" collapse!

I mean, who would've guessed...?
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Pablo Andrade Aug 6, 2017

When are we going to recognize, once and for all, that politics matter. Yes, the Venezuelan economy is collapsing. And the causal chain points to other place than the decisions made by those who have ruled the country for almost two decades. Maduro is not a weird accident of the Bolivarian Revolution; it's a result. The creation of a predatory totalitarian regime is, also, a result of strategic choices, made by those who rule over the Venezuelan state.
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Bradley Parkes Aug 6, 2017

And to think only 10 years ago Nobel Prize winning, and PS contributor, Joe Stiglitz predicted Venezuela's form of socialism would work.

http://cafehayek.com/2016/05/joseph-stiglitz-met-with-and-praised-hugo-chavez.html
- Michael James Aug 7, 2017
  
  I have no idea if Stiglitz made such a call. Your link is to a Hayekian site that claim so but only gives yet another opinion site rather than a direct link to anything Stiglitz actually said or wrote.
  Thus all you have done is succeed in wasting my time and made me regret clicking on a useless self-serving bit of internet trash. Almost certainly you yourself have never ventured outside those same self-serving sites. Because if you had you would actually give a link that proved what you and those sites claim.
  - Brian Gladish Dec 29, 2017
    
    Here you go, Michael, the first result that comes up googling "Joseph Stiglitz Venezuela." https://venezuelanalysis.com/news/2719
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William Cash Aug 6, 2017

The US has been doing quite a bit to make Venezuela fail. They've use the National Endowment for Democracy (which is anything but) and USAID to undermine the government as much as they can. It's tough for any communist government to survive in South America because of the United States. You can call it socialist mismanagement but there have been other countries there badly mismanaged but because they abide by our wishes, we help them.
- STEPHEN LOUIE Aug 7, 2017
  
  Using the US as a bogey man to scare the children of Venezuela is a time tested tactic. The reality is the People of Venezuela voted and placed Chavez into power. They heard promises of "free stuff". The US and International community can't do anything for Venezuela. The people have to learn themselves that nothing is free. It is scary to know even the US has many people willing to cast a vote for "Free stuff"
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- Sector 7G Aug 6, 2017
  
  So we should *help* Maduro jail opponents and subjugate his people? That's a curious position.
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Krzysztof Werkun Aug 4, 2017

I would suggest into looking to 1970s-1980s Poland as a good proxy to what’s happened (and is happening) in Venezuela. The parallels are uncanny - in 1970s Polish communist government borrowed heavily to create an illusion of prosperity. The easy times ended by 1979 when government had to cut back to maintain debt service. That resulted in mass protests (creation of Solidarity) - response of the government was to impose military takeover and print money. That managed to keep peace for only few more years but by end of 80s government lost the ability to control security services and in effect gave up power. During the period you had the same high inflation (80% monthly in some years, empty shelves, and average wage of 6 dollars a month).
- Gabriel Alejandro Aug 4, 2017
  
  Krzystof, do you have some academic papers on the issue of Poland? I'm interested on this.
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Chris Jones Aug 3, 2017

I heard the Cubans are running the political machine that keeps Maduro in power. Without Venezuela oil, Cuba would fail as well. No wonder the utopian Socialist theftocracy is failing...even with some of the largest oil and gold reserves. Socialists can turn the Garden of Eden into the Sahara Desert as I believe Magararet Thatcher said.
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Bernard Fudim Aug 2, 2017

Venezuela should ask Saudi Arabia and the Russia to make investments in Venezuelan equal an amount of Venezuelan cutbacks in daily oil output. Theoretically the loss of oil income for Venezuela, could be compensated by a future increase in diversification, and the cost to the investors for local construction would be at present day low labor deflation costs. That loss of taxes could be offset by the expected higher prices and income per barrel of oil. It would help Russia and Arabia to open up markets in South America.
- John Edwards Aug 2, 2017
  
  You cannot be serious. Venezuela already owes $60 Bn. to the Chinese with not much to show for it. Why would any nation want to invest in a ruinous kleptocracy such as Venezuela?
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B Wilds Aug 1, 2017

Even though Venezuela sits upon the world's largest proven oil reserves years of mismanagement and oil prices falling in half during the last two years have brought its economy to ruin. Venezuela is running out of just about everything, meaning you can't find food, toothpaste, soap, toilet paper or shampoo.

Many of the economic problems the country currently faces flow directly from the politics of the leftist socialist movement led by the late Venezuelan President Hugo Chavez. The article below explores the is woes and why we should not underestimate how the number of violent incidents can explode and lawlessness take over when society deteriorates into chaos.

http://brucewilds.blogspot.com/2017/07/venezuela-has-descended-into-chaos.html
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Kamil Bayye Aug 1, 2017

Socialists are not good at handling peacefully and within the frame of the law their non socialist opposition.
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Francesco D'Allessandro Aug 1, 2017

Venezuela has been on the brink of a collapse for many decades. Its descent has been gradual since the times where the now deceased President Chavez was at the helm of the country. Many observers have blamed the drop in oil prices for its woes; for not investing in oil infrastructure projects; for trying to regulate food prices; for passing laws that stifle free enterprise; for the nationalization of foreign and national companies; and so on...but all of the above plus many other imbecilic political and economical maneuvers point out to an obvious conclusion: that just like his predecessor, Nicolas Maduro and his cronies have been trying in the 21st century to forge a socialist state just like Cuba. This in a nutshell is what has doomed the rich oil nation.
- Jay Dixon Aug 7, 2017
  
  So Chavez was actually a CIA agent? Or what is your point?
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Mauricio Duran-Loriga Jul 31, 2017

Since when in human history have the geopolitical interests taken into account the needs of ordinary people ? Thinking otherwise warrants anyone a seat at the kid's table for dinner.

Nothing of importance can happen in Venezuela without US approval and/or US sponsorship. There is no single evidence to think that Venezuela is currently calling its destiny.

Severe political turmoil in Venezuela inevitably leads to higher oil prices. On the short term, every oil producer happy. But it is on the longer run where the stakes are high.

Higher oil prices for the long term mean OPEC would be back to controlling oil prices, and shale would see its relevance diminished. Giving precious extra time to Russia and others to really improve their (today's) poor shale technology.

Imagine Venezuelan tension is maintained just over very few months. Oil would keep climbing, irrespective of OPEC not complying with output quotas. During these months, US shale producers could over-hedge future production, as if there was no tomorrow. As hordes of momentum chasing penguins in the futures pits would absorb any amount of future output.

Once Venezuelan tension ("unexpectedly") started to diminish, oil prices would start a major downfall and US shale producers would be feasting over a major geopolitical victory: massive forward profits realized today, increased market share, balance sheet strengthening, Russians off the technological race for a time, weakened OPEC in shambles.

For the US this is purely a kid's game, as Russia and OPEC can not possibly interfere in Venezuelan behind-the-scenes arena. Maybe it does not play out like I said. But in any case, until evidence proves otherwise, bear in mind my second paragraph.
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David Olson Jul 31, 2017

Author Ricardo Hausmann in his last paragraph, "But Venezuela’s problems are not just political. Addressing the unprecedented economic catastrophe that the government has caused will also require the concerted support of the international community.",
appears to have missed the lesson of the last several years. Venezuela's government caused this horrific mess, and there will be no solution (short of resettling 90% of the population somewhere else) unless Venezuela's government chooses to solve it, ... or at least not obstruct others from solving it.
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Steve Hurst Jul 31, 2017

As I understand it the continued payments against debt by Venezuela is related to the fact Venezuela to all intents and purposes only has oil to export and non payment of debts would imperil the survival of Pdvsa thus imperiling oil exports. Not that that helps citizens without enough food to eat

Oil money was used as a bribe at the ballot box, agriculture was damaged as an activity leaving importation of food. Venezuelans voted for this.

When asked what he thought of Western Civilisation Ghandi replied that he thought it would be a good idea. Though I suspect he was also referring to the other hemisphere as well

Elsewhere and recently, a similar though not quite as extreme development had occurred, in another democracy in the developed world. A country which should be able to feed itself ended up importing food and medicines due to easy money and when faced with a possible 30% currency collapse backed away from confrontation. That country was the seat of democracy, Greece. Although mis-speaking appears to be the root cause of the abuse of easy money I have not heard of anybody being locked up.

It appears politicians have a habit of mis-speaking, which neatly brings us to another noteworthy democracy and an event there and whether mis-speaking occurred - Brexit and pop-up toasters such as Boris J. We have also recently even had to endure the bizarre claim that another politician Tony Blair, mis-spoke about the need for war but that he was however speaking an emotional truth, whatever that may be. It would appear the truth has the many faces of Janus

The problem is the article really is discussing the failures of democracy due to abuse by lying politicians not food which is an outcome. There is no apparent cure for politicians mis-speaking. Cause and effect remains.

At what point should 'concerted support' for citizens aka 'intervention' be made with a country with a democratically elected government and why - and what are the consequences. Because Venezuela is not the only basket case, and usually the incumbents despite the situation still have their supporters. That is another question to which there seems to be no answer.

Looking at N Korea humanitarian aid is still routinely supplied by countries opposed to the ruling party, a support which assists the same ruling party remaining in power. So far aid has been refused by Maduro

.
- John Doyle Aug 7, 2017
  
  It's incautious politicians, "babes -in -the -wood" political class rendered incompetent through ignorance and political expedience that show up as incompetents . NAFTA was not a treaty that intended to benefit all the participants. That was just the rhetoric. Venezuela fell for the trap.They allowed for example. their agricultural industry to be debased as [subsidised] US corn etc out competed the local market. They probably saw it as not a big deal as oil revenue could make it worth while. But now with no oil revenue they cannot afford it, and so they starve. They quickly need to get tending the land a s a p.
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El colapso de Venezuela no tiene precedentes

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