Hit hard by 75% plummeting crude oil prices over the last 19 months has been catastrophic for Venezuela. This is compounded by President Nicolás Maduro’s bad macroeconomic policy, socialist idiocy to placate the population, with phony hegemony that likewise buys friends and socialist regimes.
Since January, and following a decisive victory, the opposition Democratic Unity took 109 seats and now controls 65% in Congress. Opposition politician Henry Ramos Allup, a lawyer, four-term congressman and current Speaker of the National Assembly, who is 72 years old, presides over Venezuela’s single-chamber legislature, is seeking a democratic path to oust President Nicolás Maduro.
Ramos Allup being the leader of the Social Democratic Action Party comes with concern to us. A member of Venezuela’s “old guard” that alternated in power for four decades before President Hugo Chavez was elected president in 1998.
“We represent an alternative. We are not going to be anti-establishment, rather an autonomous legislative power. We ask people to watch us, to demand more of us, and keep an eye on what we do to make sure we honour our commitment.”
The word “social” together with being of Lebanese descent and other groups such as COPEI, Primero Justicia, Venezuela Project, Alianza Bravo Pueblo, Un Nuevo Tiempo and host of others popping up each day whenever basic services and goods are not available is very troublesome. Just image leaving a “vacuum” to be occupied by any of these various groups with different political agendas?
In Venezuela the political, fiscal and humanitarian crisis is made worse by the inability of the political system, at present, to address the situation. Grassroots Chavismos are aware that the irresponsible socialist administration of Maduro’s measures to mess with the markets, and the largess of cronies are over. Chavistas know and Maduro’s administration knows that, for Venezuela to solve this collapse, depends on his resignation or a constitutional amendment, a referendum [to revoke his term], or calls for a constitutional assembly.
In recent weeks, Venezuela and Russia tried to lobby Saudi Arabia and other major producers into agreeing to crude oil output cuts. But OPEC’s five largest producers are not interested (Iran, Iraq, Kuwait, Saudi Arabia, and the United Arab Emirates) feeling comfortable at running 70% of daily output.
The projections are that declining US oil production is expected to force oil price marginally up to US$50 per barrel by the end of the year. Venezuela’s fiscal break-even price is $117.50 per barrel. Crude oil is trading well below $30 per barrel. The economy contracted by at least 7% in 2015. Hyperinflation is dominant; the currency is worth less than a penny, while citizens carry large quantities of cash to buy basic goods that are in short supply.
External debt is estimated to be $185 billion, with implications for the Bolivarian Alliance of the Americas (ALBA) and PetroCaribe, the Mother Teresa of social welfare in the Caribbean region. Declining oil prices means Venezuela’s financing gaps have grown difficult to fund, while depending on oil exports for 96 percent of hard currency and 40-45 percent of the federal budget.
Some are of the opinion that an agreement with China might give Venezuela some breathing room to help spark economic liberalization and eventual revival while sitting on the world’s largest reserves. However, Venezuela already owes China $50 billion. The Financial Times is reporting Venezuela will earn less than$18 billion from exports this year, while it owes $10 billion in payments on the $120 billion in debt it has racked up. That leaves $8 billion for imports.
Ninety percent of the products made in Venezuela need foreign raw material. Domestic food production is inadequate for 30 million people who increasingly depend on food imports that are government controlled. On top of that, severe drought caused by El Nino has brought 18 of the country’s hydro-electric dams to critically low water levels. This means energy rationing and a further drop in working hours will impact on jobs and hard currency to compound deficiencied caused by macroeconomic imbalances.
In any event, two publications by Donald Trump come to mind: The Art of the Deal and the other, Think Big – Make It Happen in Business and Life: would have made a perfect gift for President Nicolás Maduro, with his extreme economic weaknesses and erroneous economic decisions. At least he would have had second thoughts not to placate citizens and client states into complacency through wasteful social spending that has dug a deep financial hole, giving experts reason to conclude that default in 2016 is “difficult to avoid.” But it would be a surprise if an appeal is made the International Monetary Fund (IMF) as access to private loans dry up and Venezuela’s financial reserves are exhausted.
This means, as long as oil prices stay historically low, a power struggle looms and a new round of instability could keep growing.
The declared state of “economic emergency” would do best to address the political replacement of the socialist government ideology and, on the fiscal front, ease its spending policies and depleting foreign assets. Other measures include a voluntary bond swap or the option to sell increasingly limited assets, that of the country’s state-owned oil and gas company Petroleos de Venezuela (PdVSA). Transformation of gas and oil industries, privatise infrastructure and production sectors and a return to market economy.
The further contraction of imports would be painful but necessary to improve agricultural output and increase local production to help out the food crisis. Cash reserves on food imports would likely improve and help curtail a major source of social unrest in the country.
Maduro’s flamboyant optic in autocracy is poised to have ripple effects on sovereign debt repayments from client states in the Caribbean region. This is, however, likely to create new opportunities for real trade and commerce and the entry of new players, instead of dependency on Mother Teresa’s social welfare. A return to a structured and acceptable market economy is most advantageous.
For example, prime minister and minister for finance in Saint Lucia, Kenny Anthony, offered his thoughts on the wealth of talent in government employment, saying: “The public service has incredible talent, enormous talent; when you look across the region… and whether we are maximising the talent that is available.”
But how realistic is this when the answer lies in backward socialist government systems, outdated ideology, poor leadership and the lack of independent thought process and ability from the top. The expected result is a free for all, happy to receive grants and handouts and a non productive state enterprise that drains taxpayers.
Globally, the Argentine crisis of 2001 is seen as the barometer for Venezuela, in addition to the lessons learned in the 1990s when the Soviet Union ended its socialist nightmare. In return they rebuilt a new culture of production, efficiency and profits. Likewise, the Brazil and Mexico currency crises in the 1990s rebounded to fortunes relatively quickly.
Maduro and his cronies have made countless erroneous decisions trying to run the economy. Obviously, they can’t negotiate; they are boxed into a corner of weakness. It is time to go and allow Venezuela a fighting chance to diversify its economy, get back to market enterprise and a positive outcome.
But Maduro’s ideological bent, values and priorities that clamour for the memory of Hugo Chávez, are unsound rationales that are limited in turning ideas into policies and leading the country past socialist defacement.
Some Venezuelans challenge that if Maduro’s administration, his military and powerful Chavista congressman like Diosdado Cabello, Cilia Flore, Elias Jaua had competing ideas and a strong commitment to advancement they would at least engage with proposals and viable alternatives to move Venezuela from a collapsed state. Many assert that the Maduro administration’s strong commitment to the status quo would find such efforts objectionable and refuse to discuss but instead suffocate the process and the presidency by virtue of their power and influence.
However, history has proven that the unthinkable can happen. Desperate times call for desperate action, as the assembly looks into scandals and corruption, even to investigate currency controls and embezzlement.
Venezuela has overshot both on the high side and on the low side. It is time to cut the denial and accept; it is time to look to the future.
Melanius Alphonse is a management and development consultant based in St. Lucia. He is an advocate for community development, social justice, economic freedom and equality. He can be reached at: [email protected]
Its a sorry state indeed for a friend of Dominica. We should do as much to help them in their time of need. There will always be arguments to and for socialism and capitalism. Socialism makes leaders sound like God’s in the respective countries. I think one of that mistakes this current administration has done was to focus on short term, that is winning elections. Venezuela focused too much on socialism, they did not encourage entrepreneurship and innovation vital for the growing of one’s economy. In order for Dominica to make some major strides economically, though decisions have to be taken. decisions to make a leader the most hated man in the country. But in the long run will benefit the country. Dominica like Venezuela encourages nepotism and victimization. I am no fan of Capitalism as both have their shortfalls but we cannot make people better of by all those freebies. Hold their hands, provide them with opportunities that they may stand on their feet. Otherwise……
Criticizing a country in time of economic difficulty does not make you correct in your criticism. Venezuela has been the life blood of Dominica for many years. In recent history with the natural disaster in September. I’m not an economic expert to know the article is aimed at trying to discredit the current government in Dominica. Not withstanding as a professional personal likes and dislikes based on ideas or self interest does not superseded fact. The very same people that take the anti Skeritt or Venezuela stance are also against the geothermal project and the ones against everything else. That constant criticism and dislike is recipe for failure… its evident in the costly & petty legal battles the opposition faces over avoidable statements which in reality were all untrue.
certain people need to get a grasp on reality and stop biting the hand that feeds them, much less punch holes in the boat they floatign in because they jealous of the captain. Sot!
Yet you cannot deny any of the facts presented in the article. Non of you who come here criticizing the author can present a shred of evidence or fact to refute anything he has said. Not suprisingly this is the same attitude that the present government (in Venezuela ) has taken over the years when presented with the problems that have been facing the country for some time now. The only difference is they actually have power so what they think matters. This is why it is even more important that more and more people speak out on such matters. It is not about being against Venezuela, on the contrary, it is about wanting better for a country who has all the resources and opportunities that are needed to be successful but is being held back by an incompetent government who is more concerned with pushing socialist ideology than actually fixing the country’s problems.
I agree with you that constant naysaying about everything is unhelpful. But you don’t have to be anti-Skerrit to question how much longer our close relationship with Maduro’s regime can last or to hope that instead we rely more on development partners who have the expertise to help us build our own economic capacity — which is something that socialists utterly lack.
This is ignorance to the highest level. You know if this article was about castigating Skerrit DA Vibes would not run the article. Unless they pull it out.
Not sure why you are upset with the truth but then again it is the MO of the Labor Party and it’s operatives. The very se people who criticized Freedom, UWP are now the ones who will go to the extreme to supreme truth and free speech.
Everything said about Venezuela in the article is the truth and has been echoed for the past 2 years. In fact Venezuela’s current economic woes had been predicted with the fall of gas prices.
But you Laborites are so inclined to deception and distortion that even if the fact sit on your face you can’t see it.
well said!!!!
Now that Venezuela is in this state of financial distress, the ALBA countries needs to do their part to relieve the financial strain on that country by selling their petro caribe debt or issuing bonds to repay this debt to the Venezuelan people. I think Jamaica has done this and another member that have benefited from the petro arrangement. Barring this arrangement to help out the fellow ALBA member the countries and their governments should be seen as opportunist in this whole arrangement and hypocritical in their behavior in not wanting to assist a fellow member who assisted them when they were down. I AWAIT
you’re absolutely right, the comparatively minuscule credit given to ALBA countries like DA, JA, etc cannot put dent in Venezuelan debt.
Venezuela can be strategic about its business & resources by not just pandering to countries but private enterprises such as airlines. They could start by securing long term competitively priced fuel contracts $$ with major airlines to supply them with fuel at a low cost for a set amount of years.
They could secure resources by creating a ‘foreign reserve market’ for countries with the resources/imports they need that do not have oil reserves of their own… if Venezuela sells/reserves 1 tank fuel/oil worth $25 barrel to Zimbabwe (example) for $15, Zimbabwe gives $10 cash + $5 credit in exports. Z then uses the remaining $10 value in reserves to cover their own debt. Venezuela gets $10 cash cover debt, $5 credit buy imports from Z. In the future If Z chooses to refine the oil then V charges $10 for refined fuel. All winners!
Yes I agree this article is nothing but high sounding foolishness, in his article this man lambastes social welfare systems, and states who espouse it
Why did you not criticize the grate Europeans who has the largest social welfare systems in the world taking care of it’s citizens from the cradle to the grave
Have you any idea what it is like to go to school and stay in school hungry, have you any idea Mr Alponce what it is like for a mother of 5 with only a janitorial job, no Patriarchal support to provide food, clothing and shelter.
you fail to realize that all states including USA earn their revenue from taxes and has robust tax collection reigns ever heard of the IRS?
Yet you don’t critic them at all, Venezuela is Dominican friend and ally so you do
Your articles are always misleading, contortion of the facts devoid of understanding of international relations
so true…. the majority of European countries are social welfare states. Especially the ones furthest north… Belgium, Finland, France, Norway Germany etc. Yet poorer countries are criticized for providing healthcare, education and housing for their citizens. Certain people need to stop finding/looking for wrong in others while they themselves do the very same things they criticize others for doing! People are not stupid anymore they know, they can see it they can read about it they talk about it… these truths are no longer hidden from intelligent inquisitive people so the SELF DEFEATING propaganda isn’t working anymore!
The social programs implemented in Venezuela were never about liberation of he poor but rather a cleverly constructed system to maintain support for an incompetent regime. This is why there is so little supervision of funds that are distributed for projects for example. Most of those funds are pocketed by the people in charge, and in exchange all they have to do is make sure that the status quo of government support is maintained. That’s why there are lists passed out for people to sign to make sure that they attend political rallies but there is almost never any auditing of finances attributed to projects.
You most likely conflate the author’s points with a general sense of being against social welfare, and though the author may indeed hold such sentiments, the fact is in this case he is spot on about the ineptitude of the government in maintaining such systems and the resulting effect it has had on the country’s economy.
Your ranting is really high sounding ignorance and distortion. Most countries have a social welfare system. But a neadure of a welfare system must be reasonably based the country’s productivity. Are you aware that even while Venezuela enjoyed the high market gas prices the government struggled with balaci g it’s economy. It was all a facade.
I believe I saw the term “wasteful spending ” on a social welfare system. The deliberate act of over reaching to the poor with the sole purpose of building absolute loyalty and dependency. This is not what mist European countries do. The chancellor of Germany cannot do what Chavez or Maduro did and remain in office. In fact the chancellor does not have the authority to over reach and enable dependency.
The welfare system is just a part of Venezuela’s economic problem.
I hope our leadership in Dominica is reading. It was our PM who was pushing the rest of Caricom to join Alba. The whole region would have been dead and buried if they had followed …. Enough said.
There are people who study hard in life to end up being an ignorant. This is the case of Alponse. A man that just write articles from what he reads in the righ-wing western media and then comes with “his conclusions”. An this planet is full of people like him., misinforming people. Alponse is one of those african descendants that think he’s white? It seems so.
Since you are well informed, Mr. Ivana Cardinale, why don’t you write truthful articles to give the right conclusions on Venezuela. He may be right-winged and giving data from a right-winged perspective but is the “left” better? Venezuela is in bad shape whether you are “right” or “left”, and the days of economic prosperity are long gone. Change will most certainly come to Venezuela. Chavez and this man are bad news for the country.
Instead of attacking the man for reading and giving some perspective why don’t you try to give people the right information. You one of those folks who label black man of being white when they try to be informed and intelligent instead of believing everything is obeah and vodoo. Write and article and give the public the right information. You have done nothing above to correct the misinformation as you claim. I will let others put u in a classification.
Amen!
Wow look who has exposed ignorance. I believe the word in your first sentence should be ignoramus.
Indeed, although it’s unlikely this person is a native speaker of English, and more likely that this is simply a Venezuelan troll-for-hire paid by the Maduro regime to follow opposition writers around and comment negatively on their articles.
Everything he says is spot on (some grammatical errors in there though). The fact that you have to immediately resort to ad-hominem is an indication that he touched a nerve somewhere. The truth hurts, but the sooner it is accepted the sooner a solution can be found to the problem