Implosion of a nation
May 14, 2016 4:58 PM   Subscribe

Venezuela is falling apart. What our country is going through is monstrously unique: It’s nothing less than the collapse of a large, wealthy, seemingly modern, seemingly democratic nation just a few hours’ flight from the United States....In the last two years Venezuela has experienced the kind of implosion that hardly ever occurs in a middle-income country like it outside of war. Mortality rates are skyrocketing; one public service after another is collapsing; triple-digit inflation has left more than 70 percent of the population in poverty; an unmanageable crime wave keeps people locked indoors at night; shoppers have to stand in line for hours to buy food; babies die in large numbers for lack of simple, inexpensive medicines and equipment in hospitals, as do the elderly and those suffering from chronic illnesses. posted by storybored (97 comments total) 37 users marked this as a favorite
 
Still reading the first article, but can someone explain the toilet paper "black market"? Is toilet paper distribution government controlled? Is it illegal to sell toilet paper without some kind of license? Why is this a "black market" instead of "a different supplier?"
posted by If only I had a penguin... at 5:08 PM on May 14, 2016 [1 favorite]


Combine this with the chaos in Brazil and there's a lot to worry about inn the region.
posted by Pope Guilty at 5:10 PM on May 14, 2016 [4 favorites]


er...sorry, I'll read the rest of TFA before asking any more questions.
posted by If only I had a penguin... at 5:11 PM on May 14, 2016 [1 favorite]


I think the toilet paper thing is because of price controls. The price is being held down along with a bunch of necessities and consequently all of them are being bought up by black marketeers. I think.
posted by um at 5:14 PM on May 14, 2016 [1 favorite]


[Removed a comment and a follow-on; the post is about Venezuela, not the US.]
posted by Eyebrows McGee at 5:17 PM on May 14, 2016 [20 favorites]


This was my TLDR summary of Venezuela I posted to Facebook some weeks back --

Background:
Venezuela is a former Spanish colony, population of 30 million, GDP per capita of $15k PPP (comparison point, Malaysia is $10k PPP, Australia is $67k PPP). Primarily oil driven economy - they have the largest oil reserves on the planet and have pulled over a trillion dollars in oil profits in the past and they were the founders of OPEC. So far so good.

The current, horrible situation:
Oil represents 95% of exports and current low oil prices have plunged the country into crisis: they do not have the cash to keep running. It's not a matter of defaulting on debt like in the case of Greece: they literally do not have the ability to continue functioning as a country.

Projected net income from oil exports this year = $18 bil
Debt repayments = $10 bil
Remaining income = $8 bil
Imports per year = $37 bil (nearly all food is imported)
Current level of foreign reserves = $14 bil

(this is talking about things purely from a USD currency perspective: their situation now is they do not physically have enough USD notes available to pay for imports, and no way to obtain more)

This does not even factor in costs required to continue running the government itself and all state services (administration, education, healthcare). At present, government workers are only working 2 days a week because that's all the government can afford. At least on this front they can print more local currency (Bolivars) to pay their workers but that's an unsustainable practice.

This means they have only a few months left until their foreign currency runs out. They have broken their relations with the IMF, no private lenders will lend them money, and even China has lent them $50 bil and is unlikely to lend them any more.

They no longer have any other income producing assets to seize. To generate money, the president has seized foreign oil producing companies - and any other profitable private companies - to generate cash directly for the state to reduce their budget deficit - 1,200 private companies have been seized so far and their incomes added to the state treasury. At various points they've seized all foreign owned oil wells and refineries and made them state property.

Inflation is set to hit 720% this year and shortages of goods are rampant due to insufficient foreign exchange for imports. Empresas Polar SA, currently the largest private company in Venezuela, has been progressively shutting down their factories - the government has not provided them with enough USD to purchase raw materials from abroad to keep the factories running. There is talk about them being seized by the government as well.

Hugo Chavez, the architect of the socialism revolution in Venezuela (ruled from 1999 to 2013, when he passed away) presided over a state with rampant corruption and soaring crime rates. His daughter, María Gabriela Chávez, is the richest person in Venezuela, with a net worth of 4.2 billion dollars. The capital, Caracas, has the highest murder rate in the world: three Venezuelan cities are in the top 10 list.

Surely, you'd think, the country with the largest oil reserves in the world could do better than this. Their administration over the last few decades has seen stunning amounts of waste and corruption turn Venezuela from one of the richest emerging countries into what we see today.
posted by xdvesper at 5:53 PM on May 14, 2016 [160 favorites]


This is terrifying and sad. I wonder what humanitarian aid organizations, such as Doctors Without Borders, are able to do to help?
posted by Beethoven's Sith at 5:53 PM on May 14, 2016


What a horrible situation. It's stuff like this that gives socialism a bad rep.
posted by InsertNiftyNameHere at 5:59 PM on May 14, 2016 [3 favorites]


Asking sincerely, I would really be interested in reading a Marxist defense/analysis/post-mortem of what's been happening here. Something that doesn't feel too "THE REACTIONARIES UNDERMINED US THE ENTIRE WAY."
posted by StopMakingSense at 6:01 PM on May 14, 2016 [15 favorites]


Not to engage in a defense of Chavez, but is what's happening to the economy really much more than a particularly awful and extreme version of what's happened in many other oil-reliant countries, just with less reserves to cushion? Russia and Saudi Arabia are also feeling harsh effects (and it's not like they're otherwise models of good governance).
posted by praemunire at 6:04 PM on May 14, 2016 [8 favorites]


They import a lot of stuff and sell it at subsidized prices, now that oil prices have collapsed they can't afford to import as much. Normally local factories would increase production to offset shortages; but drought has reduced the hydro-electric output which supplies most of their power.
posted by humanfont at 6:05 PM on May 14, 2016 [4 favorites]


Return all stolen assets, amend the Constitution to ban asset appropriation and confiscatory taxes, and fire all Chavistas from all governemt and oil company offices, and the country will be on the mend within months. Smart Venezuelans will be returning from exile by the tens of thousands ... to a man they love the country and want to retake their proper places.
posted by MattD at 6:06 PM on May 14, 2016 [10 favorites]


Surely, you'd think, the country with the largest oil reserves in the world could do better than this.

Only if the oil wealth is shared around.
Not every country can be a Norway.
Most countries aren't.
And so the oil wealth accumulates in a few places (see also the horrible things happening in Delta State, Nigeria at the moment).
posted by Mezentian at 6:07 PM on May 14, 2016 [6 favorites]


Also this isn't a failure of socialism, this is a failure of management. Capitalist systems are perfectly capable of mismanaging a key source of national income and running an industry into the ground.
posted by humanfont at 6:07 PM on May 14, 2016 [57 favorites]


Many if not all of the specific governing errors described in the first article are not especially socialist. It's not a socialist policy to waste money on vanity projects like an unnacomplished race-car driver, or to fail to plan for the drop in oil prices.

Price controls are more associated with socialism but I don't think they're inherent to it. I don't know much about Venezuela, but it seems a major problem is the cult of personality created by Chavez through his beneficience towards poorer Venezuelans. It allowed for one-party rule and the resulting tendency towards corruption.
posted by callistus at 6:10 PM on May 14, 2016 [11 favorites]


Info on the Norwegian Pension Fund for anyone interested. Norway: practically socialist.
posted by Mezentian at 6:11 PM on May 14, 2016 [3 favorites]


I'd argue if the ruling family ends up with 4 billion, it's naked capitalism, whatever its label.
posted by maxwelton at 6:12 PM on May 14, 2016 [63 favorites]


His daughter, María Gabriela Chávez, is the richest person in Venezuela, with a net worth of 4.2 billion dollars.

How is her head not on a pike yet? The collusion and corruption is just so incredibly flippant and naked.
posted by Talez at 6:18 PM on May 14, 2016 [7 favorites]


If the ruling family ends up with 4 billion, it's called kleptocracy, which is a frequent symptom of Communism (which I have long referred to as "Fascism with a Socialist face"). If Socialism is done right, this kind of corruption should be impossible.
posted by oneswellfoop at 6:21 PM on May 14, 2016 [29 favorites]


Return all stolen assets, amend the Constitution to ban asset appropriation and confiscatory taxes, and fire all Chavistas from all governemt and oil company offices, and the country will be on the mend within months.

This restores oil prices how, exactly?
posted by praemunire at 6:24 PM on May 14, 2016 [24 favorites]


Of interest is Chavez's obit here on mefi. Some statements have not proved empirical, some have proved empirical.
posted by hleehowon at 6:28 PM on May 14, 2016 [6 favorites]


Well, it may not help the Venezuelan economy, but all the foreign oil companies who get Venezuelan assets back (some of them American, some Saudi) would certainly improve their bottom lines.
posted by oneswellfoop at 6:30 PM on May 14, 2016 [2 favorites]


Well, it may not help the Venezuelan economy, but all the foreign oil companies who get Venezuelan assets back (some of them American, some Saudi) would certainly improve their bottom lines.

Except we do sorta need most of that oil to stay in the ground.

Not that I have an answer to the Venezuelan economy on that front.
posted by Mezentian at 6:35 PM on May 14, 2016 [9 favorites]


All of this *was* completely predicted by pro-market commentators a decade ago. You can "no true scotsman" Chavez's socialist program all you want, but anyone who is surprised hasn't been watching.
posted by mikewebkist at 6:44 PM on May 14, 2016 [23 favorites]


One detail from reading about boats, larger yachts would literally cross oceans to "fill up" in Venezuela. Although recently it may not be safe so that may reduce that option.
posted by sammyo at 7:01 PM on May 14, 2016 [1 favorite]


Many if not all of the specific governing errors described in the first article are not especially socialist. It's not a socialist policy to waste money on vanity projects like an unnacomplished race-car driver, or to fail to plan for the drop in oil prices.

I've been listening to Francis Fukuyama's latest massive tome on political organization, and one of the points that's been driven home to me repeatedly is that its a lot more complicated than socialism vs. capitalism. Italy and Sweden are both, technically, social democracies. Russia and the USA are both, technically, capitalist states. Cuba and North Korea are both, technically, run along socialist lines.

The devil is in the details. How incentives and transparency are constructed, what the historical background of the state is. How people inside its borders view its legitimacy, how much they trust it to be, for example, an honest broker in disputes between citizens. How that state fits into the international order. Corruption will hollow out any state, I don't care what ideological foundations it's built on. As will resource traps. Norway's oil fund is a good example of avoiding resource traps, but that's incredibly difficult to do, especially in developing nations where there is always something of pressing importance to spend money on.

I'd argue if the ruling family ends up with 4 billion, it's naked capitalism, whatever its label.

Elites have been accumulating resources since before the invention of money.
But hey, nice to know capitalism just means "whatever we don't like." I have some former history professors who will be fascinated by how they've been using the term wrong all this time.
posted by AdamCSnider at 7:01 PM on May 14, 2016 [74 favorites]


Except this is clearly not caused by socialism at all, but by a combination of oil prices plunging and Chavez (a quite shrewd, clever populist with a lot of good ideas) being replaced with an inept buffoon with little charisma and overt fascist leanings.

I don't think anyone can make a good case that, had Chavez lived and the oil prices stayed more even, this would still have happened. Even just one of those two things happening without the other would probably have led to a far more positive outcome.

Now it's too late, I think. Maduro will be replaced with someone on the right, who's more charismatic, and who will go right to work putting things back the way they were, and the money back into the hands of those who have always had it. Venezuela will be no less a kleptocracy, but it'll be a kleptocracy that doesn't even bother to fake concern for the poor. As usual in Latin America.
posted by Joakim Ziegler at 7:05 PM on May 14, 2016 [19 favorites]


I'm not sure that corruption is really the cause of all these problems, given that Japan, Taiwan, and South Korea have all been incredibly corrupt in the past by any measure -- cronyism, state owned enterprises, political killings, stock market scams, etc. Yet, throughout all the decades of corruption, they still managed to develop their economies and improve the material conditions of their citizens. It's something else.
posted by wuwei at 7:07 PM on May 14, 2016 [9 favorites]


While Maria Chavez's $4.2B is undoubtedly corruption, it's only 1% of Venezuela's GDP. Putting her head on a pike won't solve the problem. (Of course, if there are 500 more like her, that's another story.)
posted by CheeseDigestsAll at 7:19 PM on May 14, 2016 [3 favorites]


I think we should be wary of buying into a false dichotomy pitching chavistas on one side and the virtuous opposition on the other. Much like what's happening in Brazil right now, the opposition is many respects no better than the govt and in some respects worse. Chavez was so popular because the country was sick of a tiny cadre of elites nakedly pillaging it with barely a nod towards democracy for years and years.

Alernate histories where the opposition reigned instead of Chavez and presided over some kind of Utopian state steadfastly ignore the condition of Venezuela under the Opposition, which for the majority of people was not good. Likewise, Chavista's repression of the media etc is only matched by opposition attempts to stage a coup and use the media they own for bald-faced lies and propaganda.

This is not to valorise Chavistas - far from it, their govt has often been guilty-as-charged. However a "good guys/bad guys" narrative here is overly simplistic.

Also, lol at the idea that handing back oil concessions to foreign multinationals will somehow cure the country's ills. Yeah, that's worked gangbusters in all the other developing countries with significant mineral reserves, not at all a lovely wealth extraction scheme that only benefits the country's elite.
posted by smoke at 7:28 PM on May 14, 2016 [51 favorites]


only 1% of Venezuela's GDP.

Only?!?
posted by Talez at 7:30 PM on May 14, 2016 [34 favorites]


I don't think anyone can make a good case that, had Chavez lived and the oil prices stayed more even, this would still have happened. Even just one of those two things happening without the other would probably have led to a far more positive outcome.

Things were already getting pretty bad under Chavez. And if you structure you entire economy around a single resource, in a world full of people (not even experts - "resource trap" is common knowledge) who understand that this is a Bad Idea, you don't get to just go "oh well, oil price drop, totes not my fault, guys!" There were plenty of people who saw this coming, and the fact that some of them were gloating about it doesn't change that fact.

Honestly, I don't think Chavez could have turned it around, despite his popularity. Weaning the state off oil would have required a lot of hard choices, it would have made him enemies within his own party (within his own family, look at his daughter) who profited from the corruption, and meant alienating millions of Venezuelans who would have had to wait to have their problems addressed while investments in education, manufacturing etc. paid off (which takes time). He probably would have been removed from power. That's the thing about populist demagogues, even ones with the best of intentions. Once you can no longer deliver on your promises, you're just One of Those People you've been railing against in the eyes of many of your followers.

I'm not sure that corruption is really the cause of all these problems, given that Japan, Taiwan, and South Korea have all been incredibly corrupt in the past by any measure -- cronyism, state owned enterprises, political killings, stock market scams, etc. Yet, throughout all the decades of corruption, they still managed to develop their economies and improve the material conditions of their citizens. It's something else.

Yes and no. There are levels of corruption. The Asian Tigers were all relatively strong states from their inception, whose economic growth involved industrialization and the growth of modern service/information economy sectors. No easily-come-by fossil fuels they could splurge on. For elites to grow fat in those societies they needed to invest in things like infrastructure, manufacturing, and higher education. When corruption grew too bad, reforms were pushed through because otherwise further growth couldn't be maintained. Venezuela's regime was able to maintain itself via oil sales and expropriations long enough that when things came to a head they were (are) well past the point of safe return.
posted by AdamCSnider at 7:38 PM on May 14, 2016 [18 favorites]


Chavez was so popular because the country was sick of a tiny cadre of elites nakedly pillaging it with barely a nod towards democracy for years and years

the first author of the Atlantic piece, before going to the World Bank, was minister of trade in the regime before Chavez.
posted by ennui.bz at 8:07 PM on May 14, 2016 [16 favorites]


Any country basing its livelihood on fossil-fuel extraction (including Norway and, largely, the U.S.) is dooming future generations to unheard-of worldwide suffering. Without massive worldwide redistribution of the ill-gotten gains from many decades of ecological resource extraction, we should consider this Venezuela situation as only a lighthearted preview of what is to come in much of the world. (Incidentally, mostly that part of the world that has spent centuries being shat upon by imperialism/capitalism/neoliberalism/etc.).
posted by anarch at 8:13 PM on May 14, 2016 [5 favorites]


only 1% of Venezuela's GDP.
Only?!?


Comparing rich people's worth to GDP is not the best measurement. Considering the direction the Venezuelan economy is going (GDP is shrinking rapidly), even if Maria Chavez had taken a personal hit, that comparison would've been well under 1% a few years ago.

Meanwhile, the U.S. GDP in 2014 was $17.4trillion while the total net worth of Forbes' 10 Richest Americans was about $460billion, or about 2.6% of GDP (Bill Gates was .43% all by himself, and the whole Forbes 400 totalled $2.29trillion or 13% of GDP). Like comparing apples to broccoli.
posted by oneswellfoop at 8:15 PM on May 14, 2016 [5 favorites]


I reiterate my comment from when this post was first made (then removed):

While there is no doubt Venezuela is suffering currency collapse and hyperinflation, one must be careful easily accepting the analysis from a Tory rag like the Economist. The magazine has been a cheerleader for neoliberal policies.

Venezuela's economy has been based on oil which price has collapsed. Like other countries which are oil producers, and generally countries where extractive industries for export have dominated, the wealth had flowed to a favored few. Pre-Chavez, the beauty of the neighborhoods and beaches of the rich was a stark contrast to the poverty of the barrios. Corruption was endemic before Chavez. In the countryside, large landowners controlled the police and supported private bands of enforcers. Many small farmers and landholders were forced off the land as it became concentrated in large ranches and farms. It has been additionally alleged that certain right wing revolutionary groups in neighboring Colombia who had fought a 50 year insurgency were supported by rich Venezuelan families (and Colombian ones). Traffic in arms and supplies into Colombia was reduced once Chavez came to power; this is one reason, among others, why these groups went into decline.

Yes, Venezuela is a mess, but it's been that way for the poor for decades. That is why they supported Chavez in the first place and still support his (now failed) party. For them, shortages and grinding poverty are just another day.

The parallels with Brazil are not exact but close. Chavez' "Bolivarian Revolution" eventually just replaced the existing corrupt elites with another set. In Brazil, Lula's PT once in power, became just as corrupt. The "Car Wash" investigation has implicated the Brazilian VP (not a member of PT and now president since Rousseff was impeached) as well as many politicians of all parties. Some 60% of the accused were from Lula's PT party. The net result in Brazil, and possibly Venezuela, is the undemocratic installation of a government which could be characterized as neoliberal and certainly supporting the elite pre-Lula and Chavez. Glenn Greenwald has kept up running reports on this on The Intercept.
posted by sudogeek at 8:19 PM on May 14, 2016 [38 favorites]


I don't know about the level of corruption, but it should be noted that the $4.2 billion number people keep repeating is sourced from Breitbart.
posted by JackFlash at 8:21 PM on May 14, 2016 [6 favorites]


But hey, nice to know capitalism just means "whatever we don't like."

This always happens! "Fascist" basically means "assholes" by now.
posted by thelonius at 8:25 PM on May 14, 2016 [3 favorites]


the first author of the Atlantic piece, before going to the World Bank, was minister of trade in the regime before Chavez.
I went to school with the second author. He may have a vested interest in a particular narrative, but look at his blog over the last fifteen-odd years. He has a pretty damn good success rate at calling these kinds of developments.
posted by BrunoLatourFanclub at 8:25 PM on May 14, 2016 [5 favorites]


The extreme poverty of the pre-Chavez governments also was pretty miserable and corrupt. I am not a Chavez fan, but the problems didn't just start with one bad leader. Also I doubt many governments would be able to handle the both a drought that kills the electric power grid and a crash in prices of the main source of revenue.
posted by humanfont at 8:33 PM on May 14, 2016 [8 favorites]




only 1% of Venezuela's GDP.

Only?!?


My point was not that the amount was small: it's egregiously large. My point was that the problems couldn't be blamed on a single person, nor solved by executing that person.
posted by CheeseDigestsAll at 8:42 PM on May 14, 2016


One of the problems with Venezuela's oil income is that they have huge reserves but the oil itself is not really desireable. It's thick and has lots of sulfur, so it takes special refineries to use it -- and most of the ones which can are in Texas.

The oil extraction infrastructure has been falling apart because the government isn't investing enough each year to keep it up. (They've been using that money instead to bribe voters by subsidizing consumer goods.)

And nationalizing all of it (i.e. stealing it from foreign companies) hasn't helped any.

Now they're in a trap. Even if the government wanted to fix the oil extraction infrastructure, the stuff they'd need to buy can only be purchased internationally and no one, no one will provide it on credit. It's gonna be cash on the barrel head, hard currency, and Venezuela doesn't have any.

So it's not just that the world price of oil has collapsed. Venezuela is progressively producing less and less of it because their equipment no longer works and cannot be repaired. It's a squared failure mode.

The country is on the brink of a social explosion that only a negotiated transition can prevent. Except that's not going to happen. In situations like this it never happens. The ruling Junta will hang on until the entire country is burning, and then will quietly sneak away and live in luxury on all the money they stole during their years in power, leaving the country in tatters with rioting in the streets. (That's what happened in Haiti and is happening right now in Zimbabwe.) And it's beginning to happen in Venezuela; the government has sent tanks into the streets in the last few days to help maintain order.

And how do you recover from that? If history is anything to judge by, the unpleasant answer is "You don't." Not unless a foreign country decides to help you by using military power to remove the Junta (see e.g. the US taking out Noriega in Panama or Tanzania taking out Idi Amin in Uganda). That kind of intervention seems very unlikely in the case of Venezuela; it's not obvious who would do it.
posted by Chocolate Pickle at 8:44 PM on May 14, 2016 [16 favorites]


Venezuela's government revenues were about 45% derived from oil. It costs them around $25 to create a barrel of crude. So a drop in oil prices from $100 to $50 represents a loss of around 35% of government revenue. In addition, maybe 15% of the entire GDP is oil, so that's a 10% loss of raw GDP, before taking into account trade imbalances and other indirect effects. So it wouldn't really matter who was running things, left or right -- as long as the government was so dependent on oil, the fall in prices means any government would fall.

That said, once the Chavistas are finally deposed, the neoliberal opposition will (a) probably (re)privatize much of the oil (keeping the proceeds for themselves, amounting to far more than $4 billion), and (b) be quite happy with a much smaller federal government providing many fewer services. I suppose the upside is that once the loans start flowing again to a more congenial government, Venezuela will at least be rid of the resource curse. But this is a terrible way to do it.
posted by chortly at 8:50 PM on May 14, 2016 [18 favorites]


To clarify my earlier statement that stuff like this gives socialism a bad rep is not to say that I think Chavez and Maduro are actually practicing socialism. They clearly are not!

My point was merely that conservatives of all stripes in the west will seize on the fact that they (the Venezuelans) have been operating under "socialism" so they (the conservatives) can point out the evils of socialism and prevent any movement toward policies like those implemented in the Nordic countries.
posted by InsertNiftyNameHere at 8:56 PM on May 14, 2016 [4 favorites]


Norway's oil fund is a good example of avoiding resource traps, but that's incredibly difficult to do, especially in developing nations where there is always something of pressing importance to spend money on.

Speaking of the contrast between Norway and Venezuela, I remember seeing a quote somewhere: "You better hope to God your country discovers democracy before it discovers oil."
posted by jonp72 at 8:57 PM on May 14, 2016 [24 favorites]


sic semper socialism. capitalism sucks, but the historical record is difficult to argue with.
posted by p3on at 9:14 PM on May 14, 2016 [3 favorites]


[Couple of comments deleted. Disagree politely.]
posted by Eyebrows McGee at 9:31 PM on May 14, 2016 [1 favorite]


Another reason Venezuela is having trouble with its oil extraction infrastructure is that it takes a great deal of knowledge and expertise to run such a system, which was being provided by the foreign oil companies. When their property was stolen, they left and took all their engineers and managers with them.
posted by Chocolate Pickle at 9:36 PM on May 14, 2016 [2 favorites]


Venezuela is not so much a failure of socialism, but rather a failure of *populist* socialism.

Chavez (and Maduro) believed that you could literally just take money from the wealthy and use that money to buy votes from the poor.

The only problem with this idea is that eventually the wealthy just leave, or run out of money.

A stable and fully-functioning socialist state requires some kind of productive activity to keep socialism running. Or, to put it another way, if you're going to redistribute wealth, you had better make sure that next year there is some wealth to redistribute. You can't just declare that "all consumer electronics will be free" without coming up with some kind of plan to get more consumer electronics next year.

At the end of the day, you cannot continue to buy votes indefinitely. Eventually you will run out of resources to redistribute, and the people who voted for you will start voting for somebody else -- or maybe stand by while the military takes over. You are -- as Marx would say -- fucked.
posted by Tyrant King Porn Dragon at 9:38 PM on May 14, 2016 [22 favorites]


This page has a chart half-way down showing Venezuela's oil exports per year since 1980. It peaked in 1997 at over 3 million barrels per day, and has been declining ever since. Now it's about 1.7 million barrels per day.
posted by Chocolate Pickle at 9:44 PM on May 14, 2016 [1 favorite]


When will ISIS become present?
posted by breadbox at 10:36 PM on May 14, 2016


Too late, the US has been destabilizing the country at the behest of the "fascist Venezuelan right" .

I am sure the disaster capitalists will be along soon.

now it's about 1.7 million barrels per day.

That's about 10% of Saudi Arabia's targets. And Aramco is looking to boost production from 10.4MMbopd to 11.7MMbopod (ish).Given the oversupply is now 2-3MMbopd, and Venezuela lacks the capacity to do much about growing its output, oil was never going to save it.
posted by Mezentian at 2:47 AM on May 15, 2016 [2 favorites]


The toilet paper bit reminded me of our own past as a communist (well, technically, socialist) country attached to the USSR. The toiler paper we used to have was sharp as a razor and hard like the pages of a glossy magazine. Sometimes there was no toilet paper at all and you had to queue. It was the question of lacking production capacities. Which I suspect is the case of Venezuela in many respects now.

That leads to extremely bad planning, or mismanagement if you wish. Not investing in self-sufficiency? Now there is a clear lesson that it's not a good thing to be completely dependent on the world, or else the world might fail you.

On the other hand, nobody mentions the highly political manner in which oil prices are set and there is no pretending that the failure of the Venezuelan regime was and is very desirable to many interests.

Edit: Oh, I forgot. Do not expect idealistic, skilled managerial hipsters to take over the country. Rich investors will first fight over the most valuable raisins in the cake and the less skilled but equally greedy lower tier will come in for the kill and devour what's left of the economy.
I, with Lovelock, see it as an opportunity to burn down the bush and let new life spout.
posted by Laotic at 4:30 AM on May 15, 2016 [3 favorites]


I went to school with the second author. He may have a vested interest in a particular narrative, but look at his blog over the last fifteen-odd years. He has a pretty damn good success rate at calling these kinds of developments.

if you believe the Atlantic piece he wrote, you would think that Venezuela's current problems stem from out-of-control unions and price controls... which is just flatly untrue, even if you think the Chavez/Maduro regime screwed things up. so, your school-friend has taken up lying for political ends, an old tradition. speaking of which:

His daughter, María Gabriela Chávez, is the richest person in Venezuela, with a net worth of 4.2 billion dollars.

I'm still trying to track down a source for this number which isn't some obvious right-wing propaganda outfit: newsmax, nope. foxnews, nope, dailymail, nope. breitbart, nope nope nope. there is a Torygraph article alleging great wealth that is extremely thinly sourced (and obviously axe-grindy). the only specific corruption alleged by Maria Chavez is a crooked deal to import rice from Argentina and the other alleged corruption by Chavez cronies seems to be of the "sweetheart deal to supply something to government" variety. conclusion: i would be surprised if some of Chavez's friends didn't get relatively rich off of his government. but, i would bet that the scale of the corruption is relatively small by "friends of the US" standards.
posted by ennui.bz at 5:04 AM on May 15, 2016 [5 favorites]


also, on the subject of lies:

And nationalizing all of it (i.e. stealing it from foreign companies) hasn't helped any.

Venezuela under Chavez nationalized the oil companies as part of contract "negotiations" in 2007, paying some compensation. The oil companies sued demanding more compensation and were awarded 1.6 billion, which the Chavez/Maduro government agreed to pay. Again, you may think that the Chavez regime wrecked Venezuela's oil infrastructure and you may be correct, but when you say that they "stole" it from western oil companies you are lying.
posted by ennui.bz at 5:14 AM on May 15, 2016 [22 favorites]


Almost certainly the toilet paper thing is textbook price control.

The total amount they paid was fractions of the book value of the assets they took. But whatever. The amount of money those IOCs made off of VZ was massive - due mostly to the old juntas signing terrible royalty deals - so weep not for them. The real problem was that once in control of the assets the failed to reinvest in them. Eating the economies seed corn. Once that happened all of these other bad things were inevitable. Ironically that's what will end up bringing the regime down and not years of american propaganda and agitation.
posted by JPD at 5:31 AM on May 15, 2016 [4 favorites]


Saudi-Aramco, Statoil and Gazprom seem to be in similar shape as Exxon Mobil, Shell and BP even though they are majority state owned. The right wing has been very effective at using anecdotal evidence to trash socialism.
posted by humanfont at 5:36 AM on May 15, 2016 [8 favorites]


You should read up on whats going on at gazprom and how Aramco and Statoil are run before you make a comment like that.
posted by JPD at 5:57 AM on May 15, 2016


Not every country can be a Norway.

So what makes Norway different?
posted by IndigoJones at 6:04 AM on May 15, 2016


Anyone who has figured out why state socialism didn't work out in Venezuela but did work out in Norway, please claim one complimentary Nobel Prize.
posted by clawsoon at 8:06 AM on May 15, 2016


His daughter, María Gabriela Chávez, is the richest person in Venezuela, with a net worth of 4.2 billion dollars.

Is anybody in Venezuela capable of amassing 4.2 billion dollars at this point? I'm less dubious than "How did they do that?" here.
posted by jonp72 at 8:17 AM on May 15, 2016


Anyone who has figured out why state socialism didn't work out in Venezuela but did work out in Norway, please claim one complimentary Nobel Prize.

There are many differences between the countries' economic situations. Petroleum exports account for 22% of Norway's GDP and 67% of its exports, while the numbers for Venezuela are more than 50% of GDP and 95% of exports.

Norway also seems to recognized the risks of being too dependent on oil, and planned ahead:
Norway has pursued a classically Scandinavian solution. It has viewed oil revenues as a temporary, collectively owned windfall that, instead of spurring consumption today, can be used to insulate the country from the storms of the global economy and provide a thick, goose-down cushion for the distant day when the oil wells run dry.

Less than 20 years after they started producing oil, the Norwegians realized their geological good luck would only be temporary. In 1990, the nation's parliament set up the Petroleum Fund of Norway to function as a fiscal shock absorber. Run under the auspices of the country's central bank, the fund, like the Alaska Fund, converts petrodollars into stocks and bonds. But instead of paying dividends, it uses revenues and appreciation to ensure the equitable distribution of wealth across generations.
Had Venezuela taken similar steps, they might not be in this position. Simply being a socialist state doesn't make things work out -- you still have to do the dirty work of anticipating problems and using central planning to mitigate them.
posted by tonycpsu at 8:39 AM on May 15, 2016 [14 favorites]


Just because you like socialism doesn't mean you should defend the people who drove Venezuala over a cliff. You'd think that seeing what everyone predicted would happen come true would make some people get more realistic about the failings and criminality of the Chavez regime but apparently it's still more convenient to blame anyone else.
posted by chaz at 8:49 AM on May 15, 2016 [8 favorites]


Just because you like socialism doesn't mean you should defend the people who drove Venezuala over a cliff.

Who's defending who? Who are you talking to?
posted by tonycpsu at 8:55 AM on May 15, 2016 [2 favorites]


Anyone who has figured out why state socialism didn't work out in Venezuela but did work out in Norway, please claim one complimentary Nobel Prize.

This one's easy, I'll even let you keep the prize (the economics one is fake, anyway): Norway had Farouk al-Kasim.

That said, Norway is also in trouble. Almost all of these problems with the oil markets are being driven by US shale gas exploration, by the way, so it's worth wondering if the US needs to start emulating Norway a bit more.
posted by anotherpanacea at 9:49 AM on May 15, 2016 [7 favorites]


His daughter, María Gabriela Chávez, is the richest person in Venezuela, with a net worth of 4.2 billion dollars.

The UK's Daily Mail says so, so it must be true.
posted by Mister Bijou at 10:03 AM on May 15, 2016 [1 favorite]


There's really no evidence either way about Chávez's wealth. It seems unlikely to be true as stated, though.

Claims like this circulate purely for their propaganda value. If it turns out instead that María Gabriela Chávez is only worth $4.2 million rather than billion, then that will still be used as evidence of corruption. It's the claim that matters, and the work the claim does undermining legitimacy.

That said, it is true that Hugo Chávez failed to invest his country's oil wealth in weening the country off of its dependence on oil revenue, and that they've badly managed their oil companies--including the nationalized ones--in various ways. His brand of popular socialism strikes me as bad governance, but perhaps this will be an opportunity to set things right as they ought to have done at the start.
posted by anotherpanacea at 10:21 AM on May 15, 2016 [1 favorite]


The real problem was that once in control of the assets the failed to reinvest in them.

as Venezuela's oil is "extra" heavy crude, if they had done a better job in investing in their oil infrastructure they would look like the Canadian oil sands industry: lots of debt in a depressed market and arguably worse off than they are now.

but, for all of the over-heated rhetoric, Chavez didn't end up fundamentally altering the political economy of Venezuela. It was a petro-state before him and it will be a petro-state after his "revolution." If oil profits were spent on consumption, it was because of the need to "buy" votes to maintain their government in a nominally democratic market-society, as well as actually feeding people and giving them health care. If Chavez had actually followed Castro, this wouldn't have been such an issue. They could destroyed the Venezuelan vampire aristocrats, plowed the oil windfall into a "great leap forward," paid Exxon their $10 billion, and then welcomed western capital to exploit the workers in a worker's state...In what scenario would Venezuela be worse off for emulating China?

The problem is that Chavez was never strong enough or ruthless enough to actually eliminate his opponents who almost certainly won't pay his supporters the same favor if they can convince the military to go along with them.
posted by ennui.bz at 10:25 AM on May 15, 2016 [1 favorite]


I accept the karmic justice.

The question about where Venezuela went wrong is probably just another iteration of the larger question of how and why the US and Latin American countries went from being vaguely similar in lots of ways around 1820 to so radically distinct by 1860.
posted by ROU_Xenophobe at 10:27 AM on May 15, 2016 [2 favorites]


The economics of vz oil are much much better than oil sands. Lifting costs are actually really low. The issue is investment in the downstream refining - which was really a US thing. But the way that impacted vz was receiving a lower price - which is fine because the lifting costs are low and the capital intensity is low.

The oil sands comparison is pretty off as the oil sands are massively capital intense.
posted by JPD at 10:28 AM on May 15, 2016 [3 favorites]


So what makes Norway different?

Prior to the discovery oil, Norway wasn't run by an entrenched quasi-feudal aristocracy. As a counterfactual, I bet, by that standard, that if Sweden (with it's tradition of vastly wealthy families in control of large parts of the economy) had claim to the North Sea oil, the Swedes would have done much worse by it...
posted by ennui.bz at 10:34 AM on May 15, 2016 [3 favorites]


Think about it as a rational capitalist. If i know if i lose power my group will lose all access to the cashflows from a project my willingness to reinvest cash generated by that project in perpetuating that project is a lot lower than if i am relatively assured those future cash flows will accrue to me someday even if my party is no longer in power.

Chavez's discount rate is rationally much higher than a Norwegian politician's.
posted by JPD at 10:38 AM on May 15, 2016 [1 favorite]


As someone who's living in shale oil country I think I must point out that the oil prices were somewhat stable a couple years ago. Then our "friends" in Saudi Arabia decided that they could crush the US producers and do away with these upstarts. Trouble is that all it did was kill off a lot of the small companies but the biggies just got more efficient and coiled up their exploration, waiting for the price to go back up (which it is starting to now). Meanwhile the Saudis are having a bit of problem with the drop in income. Couldn't happen to a nicer bunch of people.
posted by Ber at 10:41 AM on May 15, 2016


The economics of vz oil are much much better than oil sands. Lifting costs are actually really low. The issue is investment in the downstream refining - which was really a US thing. .

I know it's a cliche to blame the US, but I doubt Chavez could have reinvested without the participation of US oil technology/capital, and that wouldn't happen with nationalization, and without nationalization you have the economy of Venezuela (oil) in the hands of people with long ties to the Venezuelan ruling class.

Which just gets back to the fact that as long as the aristocratic families exist, nothing will ever get better in Venezuela.
posted by ennui.bz at 10:44 AM on May 15, 2016 [1 favorite]


Then our "friends" in Saudi Arabia decided that they could crush the US producers and do away with these upstarts.

While that's one interpretation, it also seems likely that the Saudis themselves are being put under immense pressure by shale oil. There's just too much production online right now, and it's weird to attribute the blame to other producers and not take it on ourselves: among the US's many motivations, we're clearly also motivated by the difficulty this causes to Russia, Venezuela, and Saudi Arabia.
posted by anotherpanacea at 10:52 AM on May 15, 2016 [3 favorites]


The story I heard was that the Saudis did it to hurt the Iranians.
posted by clawsoon at 12:29 PM on May 15, 2016


Hmmm.

As I follow it, this particular thing started post 9/11, with the US determined to a)gain control of more foreign oil but also, and more importantly here, b)increase domestic production to be less reliant on foreign oil.

So they did. Offshore drilling, opening up previously closed domestic areas, shale oil (dirty, inefficient and of very questionable longevity, but still, a lot of oil).

This took a while to get going as it had to be built up ... but it did.

But then the catalyst: the Russian invasion of Ukraine. Part of a larger outward push by Putin ... which the US does not like. Direct warfare was not a possibility, so economic warfare it was. Tarrifs etc ... but it was also around this time that Saudi Arabia and OPEC (the former a huge simbiot with the US due to oil-arms-construction-money convoluted entanglement) started to pump up and out a lot more oil which, besides causing the price to drop, hugely damaged Russia's income.

The reason this could happen? The US now had oil production domestically and could strongarm the Saudi's on the strength of arms, construction and expertise. The Saudi's have almost none themselves ... all they had was money and oil, the first of which is cheap and the second of which was and is running out.

I think Venezuela is an unintended side-effect. The simple economic effect of a price drop on a single-source income economy which has done nothing to buffer the effect such a drop would have. As stated by many others, it's pretty much a sure thing that this would have happened no matter which party was in power, because they just didn't think this would happen. Hell, many didn't think this (cheap oil! During/after peak oil!) would happen even though it is a logical consequence of the necessary shift towards sustainable energy.

And say what you will about Norway: their fund was set up to hedge against what happened after the oil ran out! Venezuela still has oil. Norway is just 'lucky' they set it up so they can use it now. But it was meant for use much later in the game.
posted by MacD at 1:40 PM on May 15, 2016 [5 favorites]


Did you ever try to listen to Chavez' radio show? People seem to have believed that he was a capable man, he was not. I admit that it did seem for quite some time that he had a chance to do right by Venezuela, and I believed he was going on the right path at first. However, it turned out that his skill was in putting himself in power. Everything beyond that was a failure.

quasi-feudal aristocracy

True, although those families are "old" like the Swedish ones you mention, they tended to have gotten rich less than 100 years ago and often within the last 50.

The problem is that Chavez was never strong enough or ruthless enough to actually eliminate his opponents

If only the dictator had killed more people, or perhaps the right people, then the revolution would've succeeded?

Chavez successfully held on to power, that wasn't his problem. He had room to succeed but was not capable of doing so.
posted by cell divide at 1:44 PM on May 15, 2016 [4 favorites]


Right wing media is having a field day over this, but the real culprit is the corrupt ruling class not being held accountable. Socialism has zero to do with it.
posted by Beholder at 1:48 PM on May 15, 2016 [2 favorites]




Socialism has zero to do with it.

Having a command economy that spent all its revenue on current costs and seized private assets had everything to do with it.
posted by jpe at 3:38 PM on May 15, 2016 [8 favorites]


"I went to school with the second author. He may have a vested interest in a particular narrative, but look at his blog over the last fifteen-odd years. He has a pretty damn good success rate at calling these kinds of developments."

He's also someone whose reporting has led to more credible news organizations having to issue multiple corrections over the last five years or so. Both of the authors are neo-liberal ideoogues who ignore or obfuscate neo-liberal culpability and exaggerate the anti-socialist case.

"Having a command economy that spent all its revenue on current costs and seized private assets had everything to do with it."

Not really.

I mean, this is kind of a frustrating discussion for a lot of reasons, and similar to Brazil: Both Maduro and his opposition are part of incredibly corrupt political machines (the guy whom Moises Naim worked for was the first president of Venezuela removed for corruption — he stole about $320 Billion and moved to Miami in exile, where he's been one of the main financiers of the anti-Chavez parties), and the current crisis has a lot of echoes in previous Venezuelan crises, including the collapse they had in the '80s when — wait for it — oil prices fell and they lurched into a resource trap.

But nationalization has had a mixed history in Venezuela, and in general is pretty arguably a positive overall for their economy compared to the terrible contracts they'd had under privatization regimes. The command economy has historically worked for them sometimes, but not others, and the biggest consistent refrain is that they get a windfall of oil profits, spend some of the money to rapidly improve the fortunes of a wide swath of the poor, then corruption and mismanagement piss it away, leaving them with outstanding debts and a wrecked infrastructure. It's a shame that Chavez went further and further off the rails, because his original program had been moderately successful. But, like a lot of dictators, he got wound up in ego, spent money on idiotic grandstanding shit, and couldn't recognize that institutions are more effective for government than personalities are.
posted by klangklangston at 3:59 PM on May 15, 2016 [16 favorites]


The Saudis are breaking the cartel today to fuck with the iranis, but 18 months ago the goal was to push North American unconventional and maybe deep water off the cost curve.

Remember the Saudis can always sell as much as they can pump at any price. Part of the reason why they want to blow up the cost curve is because the long term ideal scenario is moderate prices. High prices drive substitution. The Saudis have been kinda public with this.
posted by JPD at 4:08 PM on May 15, 2016 [4 favorites]


A Day in the Life: Witnessing Venezuela's Crisis
What Venezuelans are going through, as told by them.
posted by adamvasco at 5:02 PM on May 15, 2016 [2 favorites]


The alternative theory is that the Saudis recognize that global warming emissions rules, solar electric, energy costs and electric cars are bringing the era of oil for fuel to a rapid end. They are pumping and selling as much as they can now, because it's last call.
posted by humanfont at 5:37 PM on May 15, 2016 [2 favorites]


given that Japan, Taiwan, and South Korea have all been incredibly corrupt in the past by any measure

high value-add export economies that can feed themselves benefit from weakening their currency, this is a virtuous cycle in terms of being able to print their way out of difficulties.

https://research.stlouisfed.org/fred2/series/EXJPUS no doubt has left Kuroda at the BOJ scratching his head about how the heck he's supposed to print his way to hyperinflation.

I would like some of the commenters above to move beyond their black/white thinking and try to understand what life was like for the poor prior to the Chavez revolution, what was trying to be accomplished.

And how much the US and neoliberal power centers in general have been working to get Venezuela into the state of failure it is in now.

As for the Norwegian comparison, they tax their automobiles based on displacement. Don't want the locals burning up the merchandise unnecessarily, ja
posted by Heywood Mogroot III at 6:45 PM on May 15, 2016 [6 favorites]


The alternative theory is that the Saudis recognize that global warming emissions rules, solar electric, energy costs and electric cars are bringing the era of oil for fuel to a rapid end. They are pumping and selling as much as they can now, because it's last call.

Well in a sense that's what they are reacting to. The math says the higher the oil price the faster all of those things happen.
posted by JPD at 5:30 AM on May 16, 2016


It's a shame that Chavez went further and further off the rails, because his original program had been moderately successful. But, like a lot of dictators, he got wound up in ego, spent money on idiotic grandstanding shit, and couldn't recognize that institutions are more effective for government than personalities are.

Not that it particularly matters for the policy discussions here, but Chavez was never a dictator. He was repeatedly elected with large majorities, surviving both attempted military coups and multiple recall efforts. That doesn't make the legislative and other changes he made right, or change the damage many of them did to the economy. But what was done was done largely (though with a couple arguable exceptions) within the confines of democracy.
posted by chortly at 4:31 PM on May 17, 2016 [6 favorites]


It looks like the fat lady is beginning to sing. There's rioting in the streets now because of shortages of, well, everything.
posted by Chocolate Pickle at 11:09 PM on May 18, 2016


Chortly, Stalin is supposed to have said, "Those who vote decide nothing. Those who count the votes decide everything." (He probably didn't say that but the point is still well made.)

The elections during the Chavez years were notoriously crooked. To call that "democracy" is to warp that word beyond recognition.
posted by Chocolate Pickle at 11:13 PM on May 18, 2016 [2 favorites]


Venezuela's problems with democracy didn't start with Chavez. In many ways Chavez was more democratic than his predecessors. There were many contested elections and at the local level opposition parties were able to win important positions. Chavez was unable to win all the votes he wanted. He was genuinely popular with a lot of people in Venezuela and his electoral victories should not be unexpected given the progress Venezuela made under his rule. As this infographic shows a lot of the key indicators of quality of life improved significantly under Chavez for many of its citizens. The big drop in infant mortality, unemployment and poverty is difficult to ignore.
posted by humanfont at 11:34 AM on May 20, 2016 [1 favorite]


a guy on the Neogaf message board has been writing about difficulties in buying food and his attempts to immigrate to Canada since September 2015.

Here's that guy's latest post, from the 15th. Things have gone from "being able to get in line to buy food at a supermarket 1 day a week" (from his first post in December) to this:
Just ot back from a "meeting of the people" which is basically all the people who live in the sector where I live. This is the deal:

- From now on, we can only buy food which a "special ID" (which is called carnet). The really afwul shitty part? that carnet will allow us to buy our minimal ration of food ONLY IN THE SECTOR WHERE WE LIVE. Want to pick up something on your way home from work? tough luck. it's is literally incredible that I cannot buy rice or corn flour for example, 6 blocks away from where I live. this is going to be applied "soon" in bigger supermarkets according to the government supporter who explained us the new buying scheme.

I know it may (and WILL) be difficult for you to understand this shitty situation so I´ll put it this way:

We are only allowed to buy basic products if we have a special ID that allows us to only buy in certain stores.

We are only allowed to buy our ration of food one day a week.

We are only allowed to buy 1 or 2 (max) quantities of a product and that HAS to be enough for a week.

If we want to buy food, we HAVE to get to the stores at about 4 or 5am to maybe have a chance to find something when they open 5 hours later.

We are only allowed to buy food after the lottery process. This basically means every one puts their ID into a cardboard box and only a few seected will buy that day. if you are not selected, you better be prepared to go to another store, try some food exchange which is very common or wait your turn the following week.

In conclusion: this country fucking sucks
posted by Pallas Athena at 10:32 AM on May 21, 2016 [1 favorite]


They're having food riots.
posted by Chocolate Pickle at 6:52 PM on May 21, 2016


The sad thing is that food is available and could be delivered to Venezuela almost immediately. All that would be needed is for the Maduro government to ask for it.

But that would mean admitting that the problem is beyond the ability of the Maduro government to handle on its own, which would call the legitimacy and competence of the government into question, and could be fatal for Maduro himself. (Literally fatal)
posted by Chocolate Pickle at 8:31 PM on May 21, 2016






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