Nothing Has Changed
We’ll head Down The Rabbit Hole shortly but first…Simple Flying tells us that Conviasa (Venezuela government-owned airline) made a far-fetched announcement that it will begin flying between Caracas and Damascus, Syria shortly.
Most of the services offered by Conviasa follow a political point of view, particularly Russia, Iran, Cuba, and Nicaragua, although the airline currently has no scheduled flights to Iran or Cuba, despite constantly promoting travel to Tehran and Havana. (So, they tell you that you really should visit these places but won’t take you there?) This is yet another example of the Chavistas following ideology with no regard for reality or common sense. (They destroyed Venezuela’s government-owned oil company, PDVSA, once the envy of the entire oil-producing world, by firing thousands of experienced workers that they didn’t feel were “Chavista enough” then replacing them with Chavista loyalists and tripling the company’s payroll. PDVSA never recovered and to this day is a bloated, inefficient shell of it’s former self)
Damascus…really? Conviasa tried servicing Damascus in 2012 but had to discontinue service shortly after it began due to extremely low load factors. There was no commerce between Syria and Venezuela, hence no air cargo and there was no tourism (Duh), hence no passengers. We did, however, have Chavez, and now Maduro, constantly telling us how much they supported the brutal Assad regime.
So, what has changed? Well, nothing but that’s how Chavismo operates. Whatever pops into Nicolas Maduro’s head (and Chavez’s before him) at any given time is what they’ll do regardless of whether or not it makes any sense. They do it time after time after time. Anybody remember the egg fiasco?
Maduro must have had something pop into his dreams overnight when he announced early one morning that the government was reducing the price of eggs from 1,200 bolivares to 400 bolivares. Why he did it nobody knows except possibly to bolster his waning popularity. Nobody was complaining about egg prices and they were one of the few food items in abundance at the time. The cost to produce them was about 800 bolivares so the price of 1,200 seemed reasonable. Maduro said, as he always does, that he was doing this to protect “the people” from those “greedy capitalists”.
You can guess what happened. Nobody was going to sell eggs at a 400 bolivar loss so after the current stock in stores was sold at a loss supplies were not replenished by the retailers and no longer offered by wholesalers and not produced by the producers. Eggs disappeared almost overnight.
The Conviasa announcement is just another example (of countless examples) of why Venezuela will never return to prosperity until Maduro and the Chavistas are gone.
Then we have Caracas Chronicles telling us that a group of academics, one from Venezuela, one from Texas, and one from Paris, have launched a digital platform to rescue Venezuela’s lost memory.
Red Historia (History Network), created in 2021, with a mission to preserve documents relevant to understanding Venezuela, has a daunting task ahead of them. Venezuela lacks a public policy that allows the preservation and dissemination of historical documents, closing the doors to the general public and researchers.
Venezuela’s problem is one faced by all countries that embrace socialism. One of the first things a socialist regime does upon taking power is seek to obliterate history, and for good reason. Socialism’s failure rate is 100% so they don’t really want comparisons. We here at TFT wish them well in their endeavors.
And we have Energy Intelligence telling us that exports of Venezuela crude dropped sharply in February to 252,000 bpd (barrels per day), according to shipping data by Kpler.
Analysts caution against reading too much into this number due to the effect of PDVSA’s new president’s pause on shipping to evaluate contracts and loading complications due to the lack of dredging in Lake Maracaibo, a primary shipping channel.
FYI, storage volumes are way up so, as we’ve seen in the past, we can expect more environmental problems such as leaking storage tanks and leaking tankers used for storage.
Now let’s go Down The Rabbit Hole…
Chapter 1 continued…
…In the early years of building up the Barrio Adentro program oil prices were beginning what would be a 10 year run of rising prices hitting all-time highs and remaining elevated for years. For an oil-dependent economy that should be good (or great) news.
In the early days of Chavez’s tenure oil production was also high (over 3 million bpd versus slightly over 600,000 bpd last year). They had the best of both worlds…high prices and high production volume. It doesn’t get much better than that!
At the same time Chavez struck a deal with Fidel Castro to supply Venezuela with 25,000 Cuban doctors to staff the Barrio Adentro program in return for oil shipments, both at the time and for years to come.
So, the money is rolling in and there was cheap labor to staff the program. It should have been a slam-dunk to set up a program that was almost indefinitely sustainable and would benefit the Venezuelan people for generations to come. This could truly have been the legacy of Chavismo. The only way this could fail would be an unprecedented series of mistakes, miscalculations, and levels of greed and corruption never before seen in Venezuela.
Well, you guessed it! That’s exactly what happened.
The biggest factor to the failure of this program and basically every area of the Venezuelan economy and society was the massive borrowing campaign the Chavistas embarked upon. I know, it sounds crazy. With all that money rolling in why would you be borrowing $60 billion from China and billions more from Russia? The only thing I can think of is the infamous trifecta of greed, corruption, and a lust for power combined with a healthy dose of economic ignorance.
Nothing lasts forever. Other oil-dependent economies have sovereign wealth funds or “rainy day” funds, if you will. Keep your debt low and serviceable and with the cushion of your wealth fund you’ll be fine no matter what happens. The massive borrowing by the Chavistas took away all their “wiggle room” and mortgaged their future (the future of the Venezuelan people). But who worries about a “rainy day” when the sun is shining?
The sun shone brightly for a while and spurred on by widespread support from the populace the Chavistas pushed the envelope even further. They ran up a $6 billion tab with the pharmaceutical companies and expropriated various companies that would later be needed to support the healthcare sector. As is the norm, when private sector companies are expropriated by governments their production drops precipitously, if they are fortunate enough not to go out of business altogether.
Now comes the real killer. With all the oil money pouring in and all the borrowed money from China and Russia available the Chavistas didn’t use that money to fund Barrio Adentro. Instead, they diverted funds from existing hospitals guaranteeing their deterioration. Since it happened over time nobody really cared. The sun was still shining. Why worry about an incubator that doesn’t work? We have lot’s of ’em. Just throw that one in a storeroom and we’ll fix it later.
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