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 secondhighest 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 manmade catastrophe. Venezuela, by all rights, should be rich. As we just said, it has more oil than the
United States or Saudi Arabia or anyone else for that matter. But despite that, economic mismanagement on a worldhistorical
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 oilrich 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 stateowned 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 extraheavy 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 tripledigit 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.
But rather than face this reality Venezuela has opted for a game of economic whacamole. It has tried to legislate inflation
away by telling businesses what prices they're allowed to sell at, and even tried to wish it away by saying it "does not exist." All
that has done, though, is make it harder for businesses to sell things at a profitable price — which means they haven't sold
things at all. So the government has tried to fix this by doling out dollars to select companies on better terms than anyone else
can get them. The idea is that giving them money will let them keep making money — and, as a result, filling their stores —
when they sell at the prices they're supposed to. But the problem with this is while it's not profitable for unsubsidized
companies to stock their shelves, it's not profitable enough for subsidized ones to do so either when they can just sell their
dollars in the black market for more than they can resell imported goods.
The upshot is that stores go empty, prices go up, and lines last for hours — although, in typical fashion, the government has
tried to, I guess, solve this by forcing people out of them.
This is only getting worse now that the oildependent government is running out of dollars itself. Indeed, the country's biggest
brewer just announced that it's shutting down all its factories since it hasn't gotten the dollars it needs to import ingredients.
The same has happened with toilet paper, and almost with their money. Venezuela, you see, doesn't have its own printing
presses, but rather pays foreign companies to print their money for them. That means it needs dollars just to be able to create
bolivars.
But this isn't just a story about bad ideas ruining an economy. It's also a story about bad planning. Venezuela's government has
never come up with a backup system for its main hydroelectric generator, so the country doesn't have enough power now that a
drought has brought water levels down to historic lows. Maduro has done everything from rationing power to malls to moving
the clocks forward half an hour — so people won't need lights as much at night — to telling the 30 percent of the country that
works for the government to only come in on Mondays and Tuesdays.
It's a lot easier to come up with a list of things that aren't failing. That's nothing. Venezuela's economy is collapsing, its currency
is too, its stores have nothing in them, and it can't keep the lights on or its people safe. The only things the Chavistas are good
at is creating scapegoats, creating lines, and creating misery.
Call it Maduro's law: Everything that can go wrong, will go wrong when your government makes it.
https://www.washingtonpost.com/news/wonk/wp/2016/05/04/venezuela-is-becoming-a-failed-state/ |
