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Post Are Things Getting Better with Venezuela's Economy? Not Really
Created by John Eipper on 10/21/21 9:47 AM

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Are Things Getting Better with Venezuela's Economy? Not Really (José Ignacio Soler, Venezuela, 10/21/21 9:47 am)

In the most recent post from Francisco Wong-Díaz, John E requested my comment on the Venezuela issue.

There is not much more to say other than what I have pointed out in many previous WAIS posts, about the decline and tragedy in that country, created by the socialist regime with the complicity of Cuba. 

There are no reliable official figures, but I am not surprised by the level of poverty claimed by the article forwarded by Francisco.  Moreover, I would even dare to say that the real poverty figures are much greater. For years I have seen increasing numbers of people looking for food in the garbage, in the street, and at the back doors of restaurants.  I have also noted how humble people have lost weight, and children are in a state of obvious malnutrition. This is not just my perception.  It is being commented in circles across the social spectrum, such as the medical community. 

Of course the regime continues to blame this situation on the US sanctions, but as I have affirmed in the past, the deterioration of the economy began more than 20 years ago when the supposed socialist revolution of the 21st century came to power. 

For example, when the government took over, oil production was almost 4 million barrels per day.  The reduction has been progressive and constant until reaching less than 400,000 per day in the last month. On the other hand, the currency devaluation has been unstoppable, to the point that they have eliminated a total of 15 zeros from the local currency, to create the apparent miracle of updating its real value. 

There are rumors in the country that the economic situation is improving, that the government plans to privatize companies previously nationalized or expropriated, that they will invite foreign investment, etc. In my opinion this is one more mirage for several reasons. 

In the first place, the more than six million people who have emigrated in recent years have allowed the middle class and some other sectors of the population to receive remittances from abroad and to survive with those resources.  Secondly, there has been significant dollarization permitted by the government; and finally, regarding foreign investments, it is almost unthinkable for a rational investor to invest in the country, unless they are Chinese, Russian or maybe Iranian or Turkish and only perhaps for political and not economic reasons.  There is the threat of legal insecurity, the product of the arbitrariness exercised in the past in the justice system.  Not to mention the absurd economic policies. 

For these and other reasons, it is almost impossible for the economy in that country to recover soon. I wonder why the obvious will continue to be debated--that is to say, why socialist regimes always tend inexorably to authoritarianism, to appropriate public and private institutions for their benefit and, consequently, to economic and social failure. And this consequence is not a problem of the "applying" the model as many like to say.  It is a problem of the ideology itself.

JE comments:  Much appreciate the update, Nacho.  Venezuela's six million emigrants must be a peacetime record--or perhaps an all-time record.  Paradoxically, the diaspora may be propping up the regime through their remittances.  But how can one let one's family starve?

The chart below (from the US Energy Information Administration) gives Venezuela's oil production over the last two decades.  No producer would be proud of this graph.  The EIA also reports on who buys Venezuelan oil.  The #1 country is not China, which would have been my guess, but India.  China is second.

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