The People's State of Venezuela

[william.scherk]

This Economist story is a compelling summary of accelerating problems in the 'Bolivarian Republic' ... it could supply detail left out of crypto-histories of Atlas Shrugged's varied People's States.

There is no way out for the economy and people in Bizarro World Venezuela. The government is mired in delusion and incompetence, and the market is barely functioning, unable to deliver basic goods and services. All due to attempts to 'protect' the people from the consequences of capitalism, and brought to a head by nonsensical policies accompanying socialist rule. The policies are driving the entire country into a ditch. What a legacy for Chavez.

Crackers in Caracas | As the government prints money, hyperinflation looms

With a dollar’s-worth of bolívares, you can in theory buy 33kg (73 pounds) of maize flour, the national staple. But only if you can find a supermarket that has some and you are willing to queue for hours (repeatedly, since flour is rationed). For the same price, consumers could fill the tank of the family car 140 times with subsidised petrol. That amount of fuel is worth $5,000 across the border with Colombia. Guess what? Enterprising Venezuelans smuggle it across.

Venezuelans check prices on the Twitter account of DolarToday, a Miami-based outfit which publishes updates based on transactions in the Colombian border town of Cúcuta. This is where Colombians go to exchange pesos for bolívares, often to buy cheap fuel and other price-controlled goods in Venezuela for smuggling across the border. Transactions are few; the dollar rate is calculated indirectly, from the value of the Colombian peso. The result is erratic, but more realistic than the three official rates. Although it is illegal, many Venezuelan retailers mark prices based on deals struck in the Colombian backwater.

The government of Nicolás Maduro, Chávez’s hapless heir, calls the website a conspiracy to sabotage the economy and has tried repeatedly to block it. This month Elías Jaua, the influential “minister of communes”, said the government would ask the United States to arrest and extradite the “fugitive bankers” he thinks are behind it. Venezuela’s banking and stockbrokers’ associations condemned the “manipulation” of the exchange rate and called on Venezuelans to ignore all unofficial rates—and presumably also the law of gravity.

[Brant Gaede]

My understanding is the military is running and looting the country and the formal government is no longer very consequential. The Cubans might as well leave; it's even beyond communism now.

--Brant

the country is cursed by oil on top of the curse of every Spanish speaking non-European country and culture--if Argentina can't transcend Peronism, all those governments might as well be basically ignored by those elsewhere (private people should pay some attention)

[william.scherk]

My understanding is the military is running and looting the country and the formal government is no longer very consequential. The Cubans might as well leave; it's even beyond communism now.

It is a perfect storm of corruption and vested interests and bizarre economics. Your understanding is generally spot-on -- in that several parts of the government (including military honchos) benefit by the very bizarreries that Chavez/Maduro initiated. And the current leadership is too frozen, stupid or fragile-feeling to dispatch the rotten operators within who lead the speculating and hoarding.

See this May Stratfor report for some of the details of what Brant is talking about: Disbanding the Venezuelan Mafia

eg,

Festering within the government are a number of powerful individuals who were propelled into positions of influence during the administration of former President Hugo Chavez and who have used that influence to shape the economy into a mangled instrument that suited their personal interests. These individuals now function less as a government than as a mafia. Military generals and government officials have worked hand in hand to move cocaine from Colombia through Venezuela while gaming the country's purchasing and distribution mechanisms and subsidized exchange rates to realize profits from various arbitrage schemes. So even when the government is able to import basic goods, their partners in crime can hoard products at ports or in warehouses to sit and rot or eventually be sold on the black market.

Maduro inherited a government stacked with officials and generals whose primary interest is to maintain the influence and the perks that come with their positions. But Maduro has a problem. Venezuela's shortages are eventually going to reach a critical point as the country's financial cushion deflates, creating the potential for more serious unrest. At the same time, elections are due this year, and the ruling United Socialist Party of Venezuela is going to struggle to win votes when the government is running on the fumes of the Chavez era. If Maduro has any chance of carrying the country through this crisis, he will have to start by dislodging Chavistas who are distorting critical parts of the economy through their elaborate corruption schemes.

The closer you look, the more intractable are the problems. An edifice of state control plus state corruption makes rooting out the thieves and crooks ever more difficult for a reformer, and makes the country's near-term dangers ramp up. Parliamentary elections come this December. The Maduro party has lost its popular appeal almost completely. Quo vadis?

--Brant

the country is cursed by oil on top of the curse of every Spanish speaking non-European country and culture--if Argentina can't transcend Peronism, all those governments might as well be basically ignored by those elsewhere (private people should pay some attention)

I don't believe in a general Spanish curse (too much Moralist-style), but again you are correct about Argentina. It has always acted as if the economy is 'manageable,' which means gross political interference in all things monetary and trade, each succeeding crisis unfurling more elaborate self-deceptions and own-goals.

I was actually really impressed with Argentina when I was last there: in its people, anyhow. The press and media was generally free and unencumbered, and the problems of the people well-covered by very bright and sensible people. But in the end, a delusion economic policy -- married to Peronist nationalist populism and self-deception -- cannot move the cart a single inch forward. Every year Argentina is a little bit poorer, and every year the government pretends it is a little bit richer.

Reality takes a back seat.

[Brant Gaede]

Years--decades--ago, I took a geography or political science course that posited the possibility that the closer you were to the equator the poorer you and your country were likely to be--i.e., the heat affected your thinking and the environment was more sustaining for basic human survival (food, clothes and shelter). It's still only food for thought; it can't be considered knowledge.

I can't and didn't call it a "Spanish curse"--I only implied a coincidence, but I do think Spain had a lot to do with things down south for it was a top-down conquest starting with Cortez while upstairs in North America the migrants moving west made it more of a bottom-upper. In a way, because of the more substantial native empires the Spanish had to deal with, especially the Aztecs and Incas, it had to be a top-downer for it was already a top-downer and no conglomeration of WASP individualists would have succeeded down there nor do I think the Catholics were up to that kind of individualism anyway. Look what happened to them in Florida, Texas and way west in Arizona and California--just pushed aside. They might as well have been natives. But now? RECONQUISTA! (but not in Florida; too many retired kick ass Jews).

--Brant

Valley Forge forged America

ranting on, with William following me with a shovel

[Jules Troy]

Soon Canada will be in the same pickle come this October....