Saturday, January 23, 2016

Dear Venezuela: I really, really wish I knew how to quit you

Venezuela was the first country that I visited after coming to America.  It has been a long association with that country, which has been nothing but a poster-child for oil as a resource curse.  With the price of oil in a free fall of sorts, I was sure the news about Venezuela would not be pretty; after all, "Venezuela needs oil prices to hit $111 a barrel just to break even" and oil is trading at less than $30!

The Wall Street Journal opens its report with this:
The plunge in the price of oil is causing more investors to bet that Venezuela will default on its $120 billion pile of foreign debt, an event that would trigger a messy battle over the country’s oil shipments and deepen its economic and political crisis.
When pretty much all the oil-export revenue will go to serving the debt obligations, it leaves little for anything else:
The government owes more than $50 billion to private companies that service its economy, ranging from oil contractors and airlines to supermarkets that need dollars to import everything from flour to toilet paper. Major airlines have halted flights to the country and auto manufacturers and others have shut plants after the government was unable to pay for imports of needed parts and materials.
Oil prices are not projected to go up anytime soon.  So, more misery for the people in Venezuela.
Venezuela’s consumer inflation, already the world’s highest, will more than double this year to a level above all estimates from economists surveyed by Bloomberg, the International Monetary Fund said.
Inflation will surge to 720 percent in 2016 from 275 percent last year, according to a note published by the IMF’s Western Hemisphere Director, Alejandro Werner.
720 percent?
Venezuela’s economy will shrink 8 percent this year following a 10 percent contraction last year, according to the IMF. 

When economic conditions worsen, then what happens to stuff that people need?  Remember this post from last April about the shortage of toilet-paper thanks to the screwed up "socialism" of Hugo Chavez and his anointed successor?

The situation has worsened, to say the least, since last April.
It’s also having a serious impact on the sex lives and health of many Venezuelans.
How so, you ask?
Contraceptives, including birth control pills and condoms, are also on the growing list of hard-to-get items. Only one-tenth of the normal volume of contraceptives used by Venezuelans was available last year, El Pais reported earlier this month, citing the head of the country's pharmaceutical federation. 
No milk. No toilet paper. No contraceptives.  Hmmm, can it get any worse?
Experts have been warning of the potentially devastating consequences of the contraceptive shortage in a country that already has one of the highest rates of HIV infection and teenage pregnancy in the region. ...Venezuela's economic crisis could turn into a health disaster.
Oh my!  Add to this the Zika virus too.

How awful!


Anne in Salem said...

It is an awful mess for the people of Venezuela. Each story seems worse than the last. I'm not sure how this will settle, but it will be ugly.

I find this line from the article you quote to be interesting: "Major airlines have halted flights to the country and auto manufacturers and others have shut plants after the government was unable to pay for imports of needed parts and materials." Can you explain how it is the government's job to pay for imports of needed parts and materials? Seems to me, that is the responsibility of the airline or auto manufacturer, not the government. I suppose it is the legacy of decades of messed up economic practices.

Sriram Khé said...

One phrase to explain how Venezuela's government is forcing the shutdown of the auto industry and foreign airlines: "foreign exchange controls" ... which then means a default of a different kind--as in the debt is being serviced but dollars for the auto industry, for instance, are held back. It becomes a selective default, in a way. It is odd that a "socialist" government would take this route because servicing the debt pays off those rich bankers and not having dollars for other things hurts the domestic population.

Yes, years of economic mess in the making. Hugo Chavez's strange Bolivarian revolution and its legacy. As I noted in one post, the the difference between the Soviets and the Chavistas: the non-believing Soviets didn't believe that god will provide and rescue them from their terrible sins but the bible-thumpiing Chavistas do!

Mike Hoth said...

Stories like this one remind us that there are no simple solutions to national (or global) issues. I discussed veganism with a group of animal rights activists a few days ago and while they were great at parroting the common arguments they were entirely unable to wrestle with the idea that enforced veganism would starve millions of children. They also couldn't come up with something to do with tens of billions of livestock that we wouldn't be allowed to eat.

This is a similar problem. Environmentalists have argued for decades that we need to abandon fossil fuels, but even when they're selling for less than expected nations like Russia and Venezuela suffer. The world is very complicated, and all we can do is hope that economic pressures push Venezuela to reevaluate their cash cow.

Sriram Khé said...

"economic pressures push Venezuela to reevaluate their cash cow." It won't easily happen.
Political ideologies can have as tight a grip on one's thinking like how religious faith leads people to believe that their miseries and illnesses are all god's work.
When that happens, as with the fall of USSR, we cheered and applauded ... and then watched Putin create a new version of USSR, and with a bunch of his minions in a few other SSR that became new countries ...
We will hope for a better tomorrow for Venezuela ...

Ramesh said...

Well, I think your infatuation with Venezuela is less because it was te first country you visited and more because Venezuela contributes well above its proportion of Miss Worlds ! And frankly, I wouldn't be too worried about the impact of the economy on the sex lives of Venezuelans !!

Sriram Khé said...

He is baaaaaaaack after being gone for a few days (to check out some Miss Venezuelas?)

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