Thinking Mouse: What are your thoughts on allegations of mismanagement of resources in Venezuela? Having your government based on a good as volatile in price as oil (and especially when the gringos own and produce most of the oil) seems pretty stupid.
This is called the Dutch Disease and it is the cause of a lot of things including the chronic inflation that country has, which was never as bad as this though.
It’s been going on forever, but the Gulf states are all doing that too. Most oil countries do that. 97% of Venezuela’s income comes from oil. That didn’t change over the Chavez years. On the other hand, the Chavistas talk about it all the time.
There are supposedly efforts underway to develop the economy right now, but I am not sure how successful they are. It is not working to have the business class, aligned with the fascist Right, importing the food and manufactured goods.
NOT working. That’s what is causing the whole economic crisis right there because they started an economic war where they stopped producing a lot of the products that people needed most. However, they kept producing other products just fine.
There was no basis in raw materials to have those shortages in certain products. Those were simply manufactured crises by the business class refusing to import or manufacture various products.
They also hoarded a lot of products too, and they sent many other goods either to Colombia or directly to the black market instead of the real market. 1/3 of all imported goods so straight to Colombia. They do this because they can make more money smuggling to Colombia or selling on the black market.
So the government is saying we need to start making this stuff ourselves or growing and producing it ourselves. The government used to import all this stuff because the business class has been refusing to produce stuff forever, but with the drop in the price of oil (a conspiracy created by the US) the government could not do that anymore, so the crisis developed.
Around when Chavez died, there were two large attacks on the currency which may have exploded the Black market. And the black market is run by a opposition fascist in Louisiana who deliberately monkeys with the black market price of the dollar, jacking it up all the time. So the value of the black market dollar skyrocketed compared to the dollar at its normal exchange rate and this precipitated the whole crisis.
Incidentally, several opposition leaders have openly admitted that they are trying to destroy the economy in order to create a crisis and bring down the government.
The recent US sanctions made things even worse and were designed to make it impossible for Venezuela to get out of the crisis by cutting them off from the international banking system and making it hard for them to get loans and impossible for them to restructure their debt.
The government has needed forever to float the currency to get out of the crisis, but he refused to do that as it is a very difficult political decision to make and it would make a lot of their base mad. So they avoided doing this for years and hence perpetuated the crisis. Recently they created a New Bolivar that is not set on the dollar but is instead set at the price of oil. This is the same thing as floating the currency more or less, so we will see how it works.
2 thoughts on “The Dutch Disease, an Economy Depended on Oil Revenues, and Other Problems of the Venezuelan Crisis”
Money makes people a might angry! In that case, it’s interesting that Cuba got away with going lefty with no oil, but Venezuela did so with oil. So I’d say the reason is cause the Soviet Union backed Cuba.
Very good. Thanks. The thing with the gulf states is that they have support from the gringos and dont care about their working class and take skilled immigrants over educating locals (though Saudiarabia seems to want to diversify). So in Venezuela its gonna be more complex when you have the gringos conspriyng against Venezuela.