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Venezuela should be rich. Instead it’s becoming a failed state.
[WASHINGTONPOST] It's come to this: The country with the largest oil reserves in the world can't afford to brew its own beer, stay in its own time zone, or even have its own people show up to work more than two times a week.Venezuela, in other words, is well past the point of worrying that its economy might collapse. It already has. That's the only way to describe an economy that the International Monetary Fund thinks is going to shrink 8 percent and have 720 percent inflation this year. And that's not even the worst of it. No, that's the fact that the state itself is near collapse. Venezuela already has the world's second-highest murder rate, and now the Chavista regime seems to be threatening violence of its own if the opposition succeeds in recalling President Nicolás Maduro. It's a grim race between anarchy and civil war. This is an entirely man-made catastrophe. Venezuela, by all rights, should be rich. As we just said, it has more oil than the United States or Soddy Arabia ...a kingdom taking up the bulk of the Arabian peninsula. Its primary economic activity involves exporting oil and soaking Islamic rubes on the annual hajj pilgrimage. The country supports a large number of princes in whatcha might call princely splendor. When the oil runs out the rest of the world is going to kick sand in the Soddy national face... or anyone else for that matter. But despite that, economic mismanagement on a world-historical scale has barely left it with enough money to even, well, pay for printing money anymore. That's right: Venezuela is almost too poor to afford inflation. Which is just another way of saying that the government is all but bankrupt. How did Venezuela get here? Well, by spending more than it had and not having as much as it should. Let's take these in reverse order. It really shouldn't have been hard for the government to use some of its petrodollars on the poor without destroying the economy. Every other oil-rich country, after all, has figured that out. But you can't redistribute oil profits if there aren't oil profits to redistribute, or at least not many of them. And there weren't after Hugo Chavez replaced people who knew what they were doing with people he knew would be loyal to him at the state-owned oil company. It didn't help that he scared foreign oil companies off too. Or that he took money out, but didn't put it back in, so that they can no longer turn as much of their extra-heavy crude into refined oil. Add it all up, and Venezuela's oil production actually fell by about 25 percent between 1999 and 2013. But that didn't stop the government from going on a spending spree. How big of one? Well, even triple-digit oil prices weren't enough to balance its books. So it got money from the one place it could: the printing press. And it has had to get a lot more now that oil prices have fallen so far the past two years. The result, as you might expect, of printing all these bolivars is that the bolivar has lost almost all its value against the dollar -- and no, that's not hyperbole. Since the start of 2012, the bolivar has, according to black market rates, fallen 99.1 percent against the dollar. Posted by: Fred 2016-05-05 |
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