Venezuela Or Norway?
We’ll head Down The Rabbit Hole in a few but first…Punch had an Op Ed that raised concern about whether Nigeria, an oil dependent economy like Venezuela and Norway, may follow the Venezuela path rather than that of Norway.
The Norway path is to use excess oil revenue to establish a sovereign wealth fund (a rainy day fund, if you will) to stabilize the economy and benefits (universal healthcare, comfortable retirement, etc.) for the people leading to a prosperous country.
Nigeria seems to be leaning toward the Venezuela path, no sovereign wealth fund, reckless spending, and borrowing, which led to hyperinflation (a four year bout, the second longest in history), the collapse of industry and government functions (there is almost no healthcare system and retirees are starving on a pension of under $14 a month), and the overall impoverishment of it’s people.
If they continue down their current path, following the Venezuela example, even though there has been no war or natural disaster, they can expect the same results. Venezuela, under 21st Century Bolivarian Socialism, has had the worst economic collapse in the Western Hemisphere and the worst collapse in the history of the world not due to war.
As Mark Twain said, “History doesn’t repeat itself but it often rhymes”.
Then we have CBS news telling us that historically the Northern Triangle countries of Central America have made up the bulk of migrants at the US southern border. They have now been eclipsed by a new triangle, Cuba, Venezuela, and Nicaragua which passed the old Northern Triangle countries in fiscal year 2022 in the number of migrant encounters.
While a record number of 33,804 Venezuelans entered US border custody in September, that number is down 86% in October with the Biden administration’s new border policy (the old Trump policy which Biden cancelled upon taking office which led to the migrant surge).
Officials in Panama report that crossings of the Darien Gap, one of the most dangerous migrant crossings in the world but which has seen it’s use explode recently, are now down 80% as well.
And BNN Bloomberg had this headline, “Two-Cent Venezuela Bonds Lure Traders Hunting Lottery-Like Returns”. What does this tell you? FYI, for the uninitiated, the full price of the bond would be a dollar….The bond vultures are circling and with the bonds trading at two cents on the dollar traders don’t think there’s enough money to go around.
Then we had Human Rights Watch with a somewhat cautionary letter to Colombia President, (Leftist/Marxist) Gustavo Petro, on his re-engagement with the Maduro regime in Venezuela. The article detailed many of the things we talk about constantly. It was particularly concerned over the Petro government’s issuing of a statement that it is considering withdrawing Colombia’s 2018 referral to the Prosecutor of the ICC (International Criminal Court).
The withdrawal of the referral would have no legal impact on the ICC investigation but it would reflect poorly on the Petro government’s commitment to Human Rights. They should focus on restoring the rule of law in Venezuela and addressing the violence and abuses at the Venezuela/Colombia border especially concerning the Maduro regime and their ties to ELN terrorists as well as the increase in human trafficking.
And we have Reuters reporting that Venezuela politicians are discussing proposals for a fund that could release over $3 billion to provide humanitarian aid to Venezuela through the UN with the US State Department and US Treasury Department also involved. They cited recent poverty stats in Venezuela of 94%-96% of the population living in poverty and 76% living in extreme poverty (The UN metric for extreme poverty in earning less the a dollar a day and the Venezuela minimum wage, also paid to pensioners, is less than half of that). Oh, and by the way, Maduro only allows NGOs to operate on a limited basis in Venezuela. The Chavistas don’t like anything they don’t control…real help for the people makes them look bad.
Now lets head Down The Rabbit Hole….
Chapter 5/ continued….
…This is just one of many examples of failed price controls in the Chavismo era. Strangely enough, no matter how many times it fails to produce the desired outcome, they keep coming back to the well of price controls. The reason is that it sounds good and plays into the ideology. They can always fall back on the excuse the socialists always trot out there. It would have worked if not for those greedy capitalists.
Despite it’s failures the number of items subject to price controls grew over the Chavista years reaching a peak of 250. Since the government couldn’t afford to subsidize everything once all the extra revenue from oil and loans dried up whatever didn’t receive a subsidy made a second list, the shortage list. Until I lived there I had never heard of such a thing. Fedecamaras, the Venezuela equivalent of the Better Business Bureau, keeps track of this as the government would never expose how many things they had forced to disappear. While there were always some items in short supply in Venezuela it became completely out of control. Even products that were available morphed from high quality brands to low quality products due to a number of factors we’ll get into later.
So now you have less products available and consumers are forced to settle for inferior quality. Then the populace was put in the untenable position pf not being able to afford many of these due to currency devaluation, inflation, and then hyperinflation. The average Venezuelan could only afford subsidized products and even those were in short supply. People would wait in line for hours when word circulated that a delivery was scheduled. After hours in the hundred degree heat they would have to be content with a couple of packages of rice, flour,or pasta as it had to be rationed. That said, you better not be too far back in line or they would run out. After some rioting and looting the military had to oversee deliveries.
After a couple of years and even until today, availability is better thanks to dropping many of the price controls and the de facto dollarization of Venezuela, but almost nothing is available to the average Venezuelan on their minimum wage of under $14 A MONTH (under Maduro it reached a low of 67 cents A MONTH). Before I left I saw that the price of flour would only allow a minimum wage earner to buy 3 and 1/2 kilos …for the month…and that’s it! Quite a fall from the $200 – $250 a month minimum wage (which we thought was low at the time but…). As with so many things Chavismo-related, the minimum wage debacle deserves a detailed conversation so lets just say that the price controls did nothing but hurt the Venezuelan people. So what about currency controls?
Well it’s broken record time again and I’m apologizing in advance for the tedious nature of the content. The Chavistas make simple things complicated but what you’re about to see is ridiculous. Hang in there. It will blow your mind. Oh, and imagine trying to manage your finances through all of this.
In 2003 when Chavez instituted currency controls it was primarily to prevent dollars from leaving the country. It was intended to be temporary but controls remained in effect until 2019 and even then were only partially relaxed. Remember, in the US the federal income tax was intended to be temporary. The bolivar (local currency) had long been accepted only in Venezuela and a few border areas due to it’s unstable nature and retaining dollars was necessary to conduct business by both the government and individuals.
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