Here's How Venezuela's Economy Has Tanked Under President Maduro

From Bloomberg.com:

Venezuela’s President Nicolas Maduro has kept his promise to “radicalize” the socialist revolution begun by the late Hugo Chavez. And voters are not happy.
The dire state of the economy is on their minds as polls show the opposition taking Congress for the first time in 16 years in Sunday elections.

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Here's How Venezuela's Economy Has Tanked Under President Maduro - Bloomberg Business

Venezuela's severe economic problems highlight how bad policy can damage a nation's economy. Even if one sets aside the dramatic decline in the price of crude oil, Venezuela's policies very likely produced structural economic weaknesses that have proved damaging.

Hopefully the upcoming election will lead to an outcome that initiates a turnaround process.

We shall see later tonight but polls are saying an opposition victory.

Incompetents like Nicolas Maduro give socialism a bad name.

And Venezuela's problems have absoulutely nothing to do with the price of oil.

gavinfielder said:

And Venezuela's problems have absoulutely nothing to do with the price of oil.

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We agree about the government's destructive policies. However, the oil and gas industry accounts for 25% of that country's GDP and 95% of its export income (OPEC : Venezuela). Even if the country were reasonably well run, it would have faced a substantial economic shock from the decline in the price of crude oil.

Carjosse said:

We shall see later tonight but polls are saying an opposition victory.

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An opposition victory would be a welcome outcome.

Heinrich said:

Incompetents like Nicolas Maduro give socialism a bad name.

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Socialism gives socialism a bad name.

PoS said:

Socialism gives socialism a bad name.

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Depends on how you define socialism.

donsutherland1 said:

From Bloomberg.com:



Here's How Venezuela's Economy Has Tanked Under President Maduro - Bloomberg Business

Venezuela's severe economic problems highlight how bad policy can damage a nation's economy. Even if one sets aside the dramatic decline in the price of crude oil, Venezuela's policies very likely produced structural economic weaknesses that have proved damaging.

Hopefully the upcoming election will lead to an outcome that initiates a turnaround process.

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but everything is free and those guys will pay for it.

donsutherland1 said:

We agree about the government's destructive policies. However, the oil and gas industry accounts for 25% of that country's GDP and 95% of its export income (OPEC : Venezuela). Even if the country were reasonably well run, it would have faced a substantial economic shock from the decline in the price of crude oil.

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because the government promised everything would be free and has incurred major expenses to pay for all that free stuff.

donsutherland1 said:

Even if one sets aside the dramatic decline in the price of crude oil,

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Why would one set aside the single most dramatic affect on the nation's economy? Isn't that like saying "if you set aside the stock market crash and banking crisis of 2008, the US economy has still tanked." How would we know? The crash happened - in Wall Street in 2008, in oil prices 2014.

Andalublue said:

Why would one set aside the single most dramatic affect on the nation's economy? Isn't that like saying "if you set aside the stock market crash and banking crisis of 2008, the US economy has still tanked." How would we know? The crash happened - in Wall Street in 2008, in oil prices 2014.

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My point isn't that one should ignore it. My point is that even if there were no oil-related shock, the country's economic and social situation would be very bad given the destructive policies enacted by the government.

donsutherland1 said:

My point isn't that one should ignore it. My point is that even if there were no oil-related shock, the country's economic and social situation would be very bad given the destructive policies enacted by the government.

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Rather convenient.

No, the price of oil has everything to do with venezuela's problems, and the article you linked to awkwardly summed that up in 3 of its points being the exact same thing, which, what do you know, was the price of oil tanking its currency and its economy.

gavinfielder said:

Rather convenient.

No, the price of oil has everything to do with venezuela's problems, and the article you linked to awkwardly summed that up in 3 of its points being the exact same thing, which, what do you know, was the price of oil tanking its currency and its economy.

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Oil is an important part of the economy. However, destructive public policy has greatly exacerbated Venezuela's difficulties:

1. Since 2004, Venezuela did not participate in the IMF's Article IV consultations. Such consultations would have revealed that Venezuela's government was pursuing badly flawed fiscal policy, mismanaging the economy, etc. Not surprisingly, Venezuela has avoided participation.
2. Venezuela's government did little to diversify the country's economy and placed the overwhelming share of oil revenue in the government's control (effectively severing a link to public accountability through tax policy).
3. Further undercutting accountability, Venezuela's government does not release statistics on such measures as inflation, fiscal deficits, etc.
4. The government nationalized the energy and telecommunications industries.
5. The government stripped the nation's central bank of independence (squandering the central bank's reserves and undermining the possibility of a credible and appropriate monetary policy). Not too surprisingly, Venezuela is suffering from a contracting economy, deteriorating currency, and high inflation.

Ruinous governmental policy has played a key role in bringing Venezuela to its current state of affairs. Hopefully, the Opposition will have won a supermajority in the elections so as to fire incompetent or corrupt ministers, reform the constitution, restore central bank independence, and curb the current government's excessive interference in the economy.

donsutherland1 said:

We agree about the government's destructive policies. However, the oil and gas industry accounts for 25% of that country's GDP and 95% of its export income (OPEC : Venezuela). Even if the country were reasonably well run, it would have faced a substantial economic shock from the decline in the price of crude oil.

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If Venezuela were reasonably well run it wouldn't derive 95% of its export income from oil and gas.

Ahlevah said:

If Venezuela were reasonably well run it wouldn't derive 95% of its export income from oil and gas.

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It was doing that for decades before Chavez came to power. That's kinda how the US likes its vassal states: economic monocultures.

Let's not forget that Venezuela has gone through multiple economic crises every bit as disastrous as the current one.They had their every own banking crash in the Nineties; suffered from a crash in oil prices in the Eighties and all the while behaving like good capitalists should.

So, while it's convenient to blame the current problems on Chavismo, and the failure to diversify the economy is a failure they have surely shared with previous régimes, it is political hackery to claim that Venezuela has only suffered economic mismanagement with a socialist government. The very reason Chavez won the presidency in 1998 was for exactly the same reason Maduro has just lost the congressional elections this year: economic decline and falling living standards.

Venezuelan voters may believe that the Capriles/Lopez faction could manage the economy better than Maduro, but history tells us that the right has an even worse economic record than the left, as the Venezuelans appear about to discover.

Andalublue said:

It was doing that for decades before Chavez came to power. That's kinda how the US likes its vassal states: economic monocultures.

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Venezuela had an economy before Chavez came to power and Maduro administered the coup de grace with his Alice in Wonderland fantasy that the bolivar is actually worth the price of lint. Sanford and Son sold more goods than Venezuela. And when it comes to its vassal states the U.S. prefers countries like Chile where citizens can actually buy tampons and rubbers.

It wasn't just Maduro, Chavez is as much to blame.

Socialism is fine ONLY so long as the state can afford it in a sustainable fashion. The programs that Chavez started were dependent almost entirely on oil sales at decent prices. Since oil is non-renewable, the policy was doomed to eventual failure. When the oil ran out (or the price of it collapsed - as here) the government would run out of money to pay for the social programs.

Socialists are going to have to one day face the fact that as long as people are greedy, that socialism in it's purest sense is impossible for any substantial length of time. They convince themselves that huge deficits are endlessly manageable and that their socialistic/communistic dreams are possible. They are not. Just look at Japan. An incredibly powerful economy in 1990, that is being slowly eroded by gigantic government/central bank intervention/fiscal deficits (plus a low birth rate and xenophobic immigration laws). Japan is going broke (almost half of their tax dollars go just to debt servicing costs) and has recessions almost yearly. They are a mess.

The state MUST look after those who cannot look after themselves - something the right seems hesitant to do. But providing what people need is one thing...giving them what they want is quite another.

Imo, Chavez tried to give his people not just what they needed, but also what they wanted. No government can afford that long term...including Venezuela's - as it's people are now sadly finding out.

Venezuela's tough times will get worse

'The Venezuelan opposition's victory in Sunday's election exceeded even their hopes. They won more than two-thirds of the seats in the national assembly. It may be the beginning of the end for the "Bolivarian revolution" launched by the late Hugo Chavez 17 years ago, but it also will plunge the country into a prolonged period of conflict and crisis.

When the scale of the opposition's victory became clear, President Nicolas Maduro took the high road: "I call on all of our people to recognize these results peacefully, and to re-evaluate many political aspects of the revolution."

However Maduro, who took over when Chavez died in March 2013, does not intend to preside over the funeral of Venezuelan socialism. When he said "our people", he meant the Chavistas who still support the "revolution", and the fact they now obviously are a minority went unmentioned. As did the fact it was not a revolution at all: Chavez came to power legally and peacefully in the 1998 election.

The real question is whether Maduro and those around him will leave power the same way. His vague rhetoric -- "We have lost a battle today but now is when the fight for socialism begins" -- is designed to leave some doubt. And it may be a real fight, perhaps including violence, because many Chavistas will feel duty-bound not to let this historic experiment fail.

Of course, the Chavista era in Venezuelan history was not an historic experiment at all -- not, at least, unless you think that building a welfare state with oil revenues is a revolutionary idea (in which case, Saudi Arabia also has a revolutionary ideology).

True, the Chavistas are rather bigger on the notion of equality than the Saudi royal family, but what they were doing was not controversial in principle. They sought and won power through democratic means. Like left-wing politicians in early 20th-century European states, they set about improving the income, health, housing and educational level of the bottom half of society, as they had promised they would.

So long as the oil income held up, Chavismo was invincible. Mismanagement and corruption grew, as they often do when money is plentiful. Arrogance grew too, as it usually does in governments long in power, and protests were increasingly met with physical or legal violence. Still Chavez and Maduro won elections -- until the oil price collapsed.

In the past 18 months the world price for oil has fallen from US$140 a barrel to only $40. Venezuela already was facing serious unemployment and high inflation. Government-imposed price controls were creating predictable shortages of staple goods such as milk, rice, coffee, sugar, corn flour and cooking oil. But when the government's income collapsed, all those problems worsened.

Of course Maduro lost the election. In these circumstances, Chavez himself couldn't have won it. Even Simon Bolivar couldn't have won it. So now the challenge both the Chavistas and the opposition face is how to manage an orderly transition that respects democracy, avoids violence and preserves some of the social and educational gains of the past 17 years.

The first order of business of the new national assembly will be to pass an amnesty law freeing some 70 leading lights of the coalition's various parties who were jailed on highly questionable grounds, but once freed, will try to reassert their leadership of those parties, which will probably undermine the fragile unity of the coalition.

Nothing the new opposition-dominated legislature does in the short term can change the dire economic situation. Maduro still will control the executive branch, with a presidential mandate that extends into 2019, unless the opposition forces a recall referendum on his presidency, which it can legally do by next April.

The "experiment" is over, but the crisis isn't.'

Gwynne Dyer is an independent journalist living in London, England


Venezuela's tough times will get worse | The London Free Press

DA60 said:

Venezuela's tough times will get worse

'The Venezuelan opposition's victory in Sunday's election exceeded even their hopes. They won more than two-thirds of the seats in the national assembly. It may be the beginning of the end for the "Bolivarian revolution" launched by the late Hugo Chavez 17 years ago, but it also will plunge the country into a prolonged period of conflict and crisis.

When the scale of the opposition's victory became clear, President Nicolas Maduro took the high road: "I call on all of our people to recognize these results peacefully, and to re-evaluate many political aspects of the revolution."

However Maduro, who took over when Chavez died in March 2013, does not intend to preside over the funeral of Venezuelan socialism. When he said "our people", he meant the Chavistas who still support the "revolution", and the fact they now obviously are a minority went unmentioned. As did the fact it was not a revolution at all: Chavez came to power legally and peacefully in the 1998 election.

The real question is whether Maduro and those around him will leave power the same way. His vague rhetoric -- "We have lost a battle today but now is when the fight for socialism begins" -- is designed to leave some doubt. And it may be a real fight, perhaps including violence, because many Chavistas will feel duty-bound not to let this historic experiment fail.

Of course, the Chavista era in Venezuelan history was not an historic experiment at all -- not, at least, unless you think that building a welfare state with oil revenues is a revolutionary idea (in which case, Saudi Arabia also has a revolutionary ideology).

True, the Chavistas are rather bigger on the notion of equality than the Saudi royal family, but what they were doing was not controversial in principle. They sought and won power through democratic means. Like left-wing politicians in early 20th-century European states, they set about improving the income, health, housing and educational level of the bottom half of society, as they had promised they would.

So long as the oil income held up, Chavismo was invincible. Mismanagement and corruption grew, as they often do when money is plentiful. Arrogance grew too, as it usually does in governments long in power, and protests were increasingly met with physical or legal violence. Still Chavez and Maduro won elections -- until the oil price collapsed.

In the past 18 months the world price for oil has fallen from US$140 a barrel to only $40. Venezuela already was facing serious unemployment and high inflation. Government-imposed price controls were creating predictable shortages of staple goods such as milk, rice, coffee, sugar, corn flour and cooking oil. But when the government's income collapsed, all those problems worsened.

Of course Maduro lost the election. In these circumstances, Chavez himself couldn't have won it. Even Simon Bolivar couldn't have won it. So now the challenge both the Chavistas and the opposition face is how to manage an orderly transition that respects democracy, avoids violence and preserves some of the social and educational gains of the past 17 years.

The first order of business of the new national assembly will be to pass an amnesty law freeing some 70 leading lights of the coalition's various parties who were jailed on highly questionable grounds, but once freed, will try to reassert their leadership of those parties, which will probably undermine the fragile unity of the coalition.

Nothing the new opposition-dominated legislature does in the short term can change the dire economic situation. Maduro still will control the executive branch, with a presidential mandate that extends into 2019, unless the opposition forces a recall referendum on his presidency, which it can legally do by next April.

The "experiment" is over, but the crisis isn't.'

Gwynne Dyer is an independent journalist living in London, England


Venezuela's tough times will get worse | The London Free Press

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Excellent article; very balanced and right on the money, I think.

It will be very interesting to see how the new parliamentary majority coalition will function once the jailed leaders are released and seek to re-take the reins of the Venezuelan political right when none of them have seats in parliament. There are a LOT of highly self-regarding political egos in the anti-Chavista movement. And what will happen if oil prices remain in the basement?

Andalublue said:

Excellent article; very balanced and right on the money, I think.

It will be very interesting to see how the new parliamentary majority coalition will function once the jailed leaders are released and seek to re-take the reins of the Venezuelan political right when none of them have seats in parliament. There are a LOT of highly self-regarding political egos in the anti-Chavista movement. And what will happen if oil prices remain in the basement?

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The key to any successful economy is strength in a diversified economy. Putting the path and future of a country on a commodity was a foolish endeavor. Massive socialism requires huge sums of money. With little economic viability, and a culture that embraces corruption, Venezuela's economic failure was sealed when Chavez and his successor was elected to office.

ocean515 said:

The key to any successful economy is strength in a diversified economy. Putting the path and future of a country on a commodity was a foolish endeavor.

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Tell that to the Saudis.

Massive socialism requires huge sums of money.

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No, it doesn't. It just means sharing around what there is more equally.

With little economic viability, and a culture that embraces corruption, Venezuela's economic failure was sealed when Chavez and his successor was elected to office.

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Conveniently ignoring the economic hardships and multiple crises that afflicted the country under countless US-backed, right-wing administrations, even when oil production and prices were sky high.

I've no doubt corruption happens, but then, can you name me a Latin American country where political corruption isn't endemic, except for those rampant lefty, pacifists in Costa Rica?

Ahlevah said:

If Venezuela were reasonably well run it wouldn't derive 95% of its export income from oil and gas.

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What about Saudi Arabia and other middle eastern countries?

Countries export what they are best at producing. They import what they are worst at producing.

imagep said:

What about Saudi Arabia and other middle eastern countries?

Countries export what they are best at producing. They import what they are worst at producing.

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The difference is Saudi Arabia saved and invested its wealth--in infrastructure, education, housing, etc. Venezuela's culture of corruption squandered it and then Chavez came in and used it to distort the economy by subsidizing everything so poor people wouldn't be poor. If all of the wealth accrues to the government because an industry is nationalized (as is the case of Venezuela's oil industry) then economic well-being depends on how efficiently those funds are allocated. Venezuela's management of its economy leaves something to be desired:

Former minister Gerver Torres points out that in 1998 oil represented 77 percent of Venezuela's exports but by 2011 oil represented 96 percent of exports. That means today only around 4 percent of the goods that Venezuela exports are non-oil products! The Venezuelan economy relies almost exclusively on the price of oil and the ability of the government to spend oil revenues. This will take years to reverse because (the Chavez government has crippled private businesses and national industry through expropriations and nationalizations).

5 Ways Chavez Has Destroyed the Venezuelan Economy - ABC News

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Andalublue said:

Tell that to the Saudis.

No, it doesn't. It just means sharing around what there is more equally.

Conveniently ignoring the economic hardships and multiple crises that afflicted the country under countless US-backed, right-wing administrations, even when oil production and prices were sky high.

I've no doubt corruption happens, but then, can you name me a Latin American country where political corruption isn't endemic, except for those rampant lefty, pacifists in Costa Rica?

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Perhaps you should look into what a number of ME Oil States are doing to diversify their economies. They recognize their oil riches are fleeting, and they must develop other industries.

And yes, as every socialist country has demonstrated, it takes massive amounts of money to pay for the social programs that are created.

Conveniently ignoring facts does little to establish any reason to view your opinion as accurate.