Category Archives: Venezuela

Venezuela

A primer on PDVSA — and the interaction of oil and politics in Venezuela

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CARACAS, Venezuela — You’d think in Caracas that the governing party were the PDVSA, not the PSUV.Venezuela Flag Icon

But the state-owned oil company, Petróleos de Venezuela, S.A., functions as much as any other organ in Venezuela in service of the government, formerly headed by Hugo Chávez and now, Nicolás Maduro.

Indeed, a stroll through Caracas finds the PDVSA brand saturates the city — much more than the nominal governing party, the Partido Socialista Unido de Venezuela (United Socialist Party of Venezuela). Here’s a PDVSA-branded hopscotch:

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PDVSA (pronounce it ‘pay-duh-vay-suh’) was founded in 1976 when then-president Carlos Andrés Pérez nationalized the oil industry at the height of an oil boom the likes of which Venezuela had never seen. Venezuela’s oil industry began in 1914 when the first oil well was drilled in Mene Grande, in western Zulia.  It began exporting petroleum by 1918, and that soon eclipsed an economy once based largely on cacao and coffee — though cacao production was dwindling in the early 20th century, Venezuela exported more coffee than any country in the world other than neighboring Brazil.

Venezuela was the world’s leading oil exporter by the end of the 1920s — Caracas was known as ‘the gas station south of Florida.’ We think of the Organization of Petroleum-Exporting Countries (OPEC) as a largely Middle Eastern cartel today, but it was founded in large part in 1960 on the initiative of Venezuelan energy minister Juan Pablo Pérez Alfonso, who helped create it after reaching out to his ministerial counterparts in Saudi Arabia.

Through the next 40 years, Venezuela’s fortunes rose and fell with global oil price, but PDVSA remained relatively at arm’s length from the government — it paid income taxes and royalties to the government, as well as dividends (because it’s entirely state-owned).

This continued even after Chávez was elected — until 2002, that is, when Chávez attempted to take control of PDVSA, leading to a rebellion/coup attempt and a general strike among PDVSA employees later that year. Chávez, as it turns out, simply fired most of the offenders, and over the past 11 years, PDVSA has become essentially an arm of the government, which itself increasingly became an organ of chavismo.

So PDVSA employees today wear red, the color of chavismo, and over the past decade, PDVSA has been a direct contributor of funds to social programs, bypassing the formal channels of government — and also incurring its own liabilities (indeed, the IMF’s estimate of Venezuela’s public debt of around 51% includes PDVSA debts as well).

Whatever the benefits to deploying that capital for social welfare programs (and I’m not arguing for or against), it means there’s simply less capital to maintain production or develop new avenues for refining oil.

Rafael Ramírez, a loyal chavista, was appointed minister of energy and petroleum in 2002 and PDVSA’s president in 2004. If Maduro wins the election, it’s expected that Ramírez will stay in place — and so will continuity in oil policy under the Maduro administration. If Maduro replaces Ramírez, however, it could be an indication that he wants to shake up some of his predecessor’s policies.

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Oil proceeds represent around 95% of Venezuela’s exports, around 20% of its GDP and over 50% of the government budget. So what happens in the oil industry matters for what happens with Venezuela’s government and its economy. Continue reading A primer on PDVSA — and the interaction of oil and politics in Venezuela →

Venezuela

Photo essay: Political graffiti and street art in Caracas

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CARACAS, Venezuela — Apropos of nothing, I wanted to collect some of the more interesting shots of political graffiti I’ve captured this week in Caracas.Venezuela Flag Icon

Most of the graffiti, of course, promotes the late president Hugo Chávez and his successor, acting president Nicolás Maduro, and not opposition challenger Henrique Capriles.

I’ll say one thing, though, and this goes well beyond street art: if any of my friends want to run for politics, I’ll send them to Caracas to talk to the chavistas because, while Capriles has a rapidly deteriorating economy, an aggressive campaign, and a defensive and lackluster Maduro all working in his favor, Maduro remains the favorite because the chavistas certainly know how to win votes.

Of course, standard political campaign banners abound throughout the city:

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But even five weeks after his death, Chávez’s presence dominates the city, even on its sidewalks and on its buildings:

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In fact, even the ‘libertador’ himself, Simón Bolívar has more street cred than Maduro:

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Here’s a commemoration of the 2011 bicentennial of the Venezuelan Declaration of Independence:

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But that’s not to say that Maduro isn’t a common enough presence (both in favor and against):

image Continue reading Photo essay: Political graffiti and street art in Caracas →

Venezuela

What’s the deal with Venezuelan presidential candidates and jumpsuits?

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CARACAS, Venezuela — I almost went to tonight’s press conference at the headquarters of opposition candidate Henrique Capriles, which is sort of ridiculously named Comando Simón Bolívar, that he called at 7 p.m. Caracas time (7:30 p.m. EST) to talk about, presumably, serious issues in the election, and sober-minded issues revolving around Venezuelan democracy.

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I didn’t, because of my low proficiency in understanding spoken Spanish (I’m unfortunately one of those people who can read, and even speak, foreign languages much easier than I can comprehend them).

But there he is… clad in an Adidas jumpsuit in the three colors of the Venezuelan flag. In 24 hours, he could conceivably be the president of a country of nearly 30 million people, and he’s not in a suit. I realize there are perhaps anti-Western interpretations at play here (Chinese political leaders have chosen Western suits and ties, not always without controversy, instead of traditional Chinese style, and Iranian president Mahmoud Ahmadinejad (and many Iranians) famously eschews neckties as a symbol of the ‘decadent’ West.

Now, I hate to pick on Capriles. He’s fit, and he certain cuts a sharper figure in a jumpsuit than either Hugo Chávez or Nicolás Maduro, who, frankly looked pretty tacky when he showed up to pay his respects to Chávez (though not the funeral) in a jumpsuit:

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But really, it’s election eve. I’m honesty curious about how this started. Is it just Chávez’s influence in yet another aspect of Venezuelan political life? Retired Cuban president Fidel Castro appears often in jumpsuits, but he’s retired, and only made the sartorial switch while he was recuperating after health problems.

Tweeter mseguias suggests, I think correctly, that it makes candidates more approachable and it appeals to poorer voters and young people. But I don’t recall ever seeing former Brazilian president Luiz Inácio Lula da Silva in a jumpsuit. Or former Chilean president Michelle Bachelet. Or Mexican president Enrique Peña Nieto. Or Colombian president Juan Manuel Santos. Or Peruvian president Ollanta Humala.

I may be wrong about this, of course, but it seems like a particularly Venezuelan phenomenon.

We should probably be happy that Chávez’s red beret didn’t take off, I suppose.

Venezuela

Livin’ la vida seca — the election dry law takes effect in Venezuela

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CARACAS, Venezuela — Imagine that following former prime minister Margaret Thatcher’s death last week, the United Kingdom implemented a week-long period banning the sale of alcohol.Venezuela Flag Icon

Or that in the weekend leading up to the 2012 U.S. presidential election, Americans would be unable to find a drink, forcing Americans to  become public teetotalers.

But Friday night at 6 p.m., that’s exactly what happened in Venezuela in advance of the presidential election on Sunday — the ley seca takes effect, which means that no alcohol can be sold publicly in the country, through at least next Monday.  It’s the third time in five weeks that the ley seca has been in effect — thirsty Venezuelans were out of luck for a week following the death of former president Hugo Chávez, and they were out of luck again during semana santa, the Holy Week.

In Venezuela, though, it’s just another obstacle to be overcome.  In a country where the official exchange rate between dollars and bolívares and the black market rate can be up to 400% different, there will certainly be a way around

So around 6 p.m. tonight, if you were grabbing beers at a corner bar, for instance, your bartender might have switched out your bottle of beer into a more discrete, opaque cup.  Venezuelans, especially, have practice getting around laws where economic incentives make breaking the law more efficient than upholding it.  Prohibition in the United States in the 1920s, and really, the ‘war on drugs’ in the past 40 years in Latin America and the United States are illustrative.

Though in a country of perfectly fine aged dark rum, Venezuela is one of the world’s top whisky importers and imbibers, I withhold any judgment as to Venezuelan taste.

So bottoms up — and happy election weekend!

Photo credit to Kevin Lees — Caracas, Venezuela, April 2013.

Venezuela

Capriles campaign optimistic with 48 hours to go — but can it win?

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CARACAS, Venezuela — The national headquarters of Henrique Capriles on Friday morning buzzed with optimism, with less than 48 hours to go before polls open in a race that many have judged hopeless for the opposition.Venezuela Flag Icon

In the wake of a rally in downtown Caracas last Sunday that brought hundreds of thousands of supporters to rally behind Capriles (without having to bus in massive numbers of supporters from across the country, as the chavista candidate Nicolás Maduro did in a similar rally on Thursday), and in the wake of a widely ridiculed comment by Maduro that a little bird told him that the spirit of Hugo Chávez blessed his campaign, Capriles campaign advisers are optimistic that their candidate has the momentum going into Sunday’s election, especially as voters realize the extent of Venezuela’s rapidly tumbling economy in recent months.

But Maduro, who is hoping to win a full term in his own right after the 14-year rule of his predecessor, Chávez, has everything else — the implicit support of the structure of the entire government, the armed forces, the state-owned oil company, plenty of resources, and significantly stronger media presence.

Though election law prohibits the publication of polls in the week prior to the election, polls are rumored to show Capriles closing a gap with Maduro — one such poll allegedly shows Maduro with a narrowing 55% to 45% lead, and Capriles’s internal polls show a massive swing as well. But whittling down Maduro’s lead and winning the election are two different things.

Leopoldo López, the former mayor of Chacao (one of five municipalities, and generally the ritziest, within Caracas) from 2000 to 2008, is one of the rising stars of the opposition. Chávez’s government barred López from running for office until 2014, a move that brought the censure of the Inter-American Court of Human Rights. In 2009, he founded Voluntad Popular, a centrist party that’s a member of the broad opposition coalition, the Mesa de la Unidad Democrática (MUD, Democratic Unity Roundtable).

‘I’m excited about change, I’m excited about the real possibility of winning, I’m excited about Venezuela opening a new cycle,’ Lopez said on Friday morning at Capriles headquarters. ‘The worries? What the government could do to put a stain on what will happen. This is not a regular election. This is not Bush-Clinton, this is not Candidate A versus Candidate B. This is a race against a state. I doubt there are other democracies where there are [such] clear differences in terms of the abuse of power. In this case, this is PDVSA, the state oil company, and the other powers of the state, against the people. But we have great faith the people will make the difference.’

The executive director of the MUD, Ramón Guillermo Aveledo (pictured above, with Caracas mayor Antonio Ledezma and other top MUD officials at his right, rejected outlandish charges made in recent days at a press conference earlier today at Capriles headquarters as well.

Here’s the arithmetic. Continue reading Capriles campaign optimistic with 48 hours to go — but can it win? →

United States, Venezuela

A conversation with Ambassador Patrick Duddy

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CARACAS, Venezuela — For what it’s worth, here’s some more of the conversation from last Friday with Patrick Duddy, who served as the U.S. ambassador to Venezuela from 2007 until 2010 and who kindly gave me nearly a half-hour of time to discuss current U.S.-Venezuelan relations.

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The late president Hugo Chávez ejected Duddy from the country on September 11, 2008, though Duddy returned a few months later, and I was curious as to his view of U.S.-Venezuelan relations especially because he served under both U.S. presidents George W. Bush and Barack Obama.

Obama’s appointee to succeed Duddy, Larry Palmer, was rejected out of hand by Chávez in 2011, and the post continues to remain vacant.  Palmer now serves as ambassador to Barbados and the Eastern Caribbean.

Duddy, a veteran U.S. diplomat, has served throughout Latin America, including Brazil, Paraguay, Chile and Bolivia.

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On the policy differences between the administrations of George W. Bush and Barack Obama on Venezuela:

It would be easier to underscore the commonalities between the Bush and Obama administrations. I served as ambassador from 2007 to September of 2008 for President Bush, and then as you know, I was expelled on Sept. 11, 2008, spent some months out of the country, [and] returned the next summer as President Obama’s ambassador…

Both administrations, while I was ambassador had a pretty clear message which was we thought… both sides would benefit from a more productive relationship.

On Maduro and potential U.S. relations in a Maduro administration: Continue reading A conversation with Ambassador Patrick Duddy →

United States, Venezuela

Growing U.S.-Venezuelan commercial ties won’t lead to diplomatic thaw if Maduro wins

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CARACAS, Venezuela — I reported earlier today in Deutsche Welle on the state of U.S.-Venezuelan bilateral relations, which aren’t exactly gangbusters, if you’ve been paying attention for the past 14 years.

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The bottom line is: don’t expect acting president Nicolás Maduro, if he wins, to transform the chilly relationship between the United States and Venezuela.

To me, however, the more interesting factor is the commercial ties between the two countries, already strong throughout the reign of the late president Hugo Chávez, but now growing ever faster as Venezuela’s economy sputters and becomes increasingly import-dependent:

Venezuela’s obvious top export is oil – and the United States is its top customer, and that’s been true during both the Bush and Obama administrations, even when relations were at their worst. The United States purchases up to 900,000 barrels of oil a day from Venezuela – it officially funds around 40 percent of Venezuela’s export receipts. Given the complex financial arrangements between China and Venezuela and Venezuela’s subsidies to Cuba and to the rest of Central America and the Caribbean, US demand for oil has directly funded Chávez’s government, despite the rhetoric against the supposedly evil, imperialist gringo empire.

But precisely because of Venezuela’s dependence on the oil industry, the other sectors of its economy have atrophied, especially under the business climate during the Chávez era, when domestic and foreign businesses alike were subjected to ad hoc expropriation. That’s made Venezuela increasingly reliant on imports of staples, such as food and even fresh produce. Venezuela is even starting to import refined oil products, in part due to a gasoline subsidy that keeps gas prices at the lowest level worldwide.

Obviously, U.S. policymakers would prefer that Henrique Capriles, the opposition candidate, wins the election. But given the incumbent advantages of the Maduro campaign, who has inherited the political infrastructure of his predecessor, Maduro’s election seems much likelier. If the Venezuelan economy does continue its downward spiral in the months and years to come, Maduro could well use anti-American rhetoric to deflect criticism from the failures of economic policy.

That means bilateral relations might get worse before they get better.

It’s uncertain whether that growing dependence would improve ties with the US – it’s easy to envision a fall in gas prices or a financial crisis result in even more brinksmanship in a Maduro administration as a distraction from harder budget choices.

Photo credit to Kevin Lees — Caracas, Venezuela, April 2013.

Venezuela

Capriles could be the better guarantor of chavismo in Venezuela

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I have an op-ed in The National Interest this morning arguing that it’s Henrique Capriles, and not chavista Nicolás Maduro, who could become the better long-term guarantor of the gains of chavismo — notably by making permanent the social welfare programs that the late president Hugo Chávez tried to implement on behalf of Venezuela’s poor:Venezuela Flag Icon

Chavistas certainly have a strong claim that for the first time since the discovery of the Mene Grande oil field in 1914 and oil production began in earnest in 1918, a significant share of the country’s oil wealth finally fell into the hands of the poorest Venezuelans. And the two-party duopoly of the center-right COPEI and the center-left Democratic Action crumbled in 1998 after years of petrodollar-fueled corruption. So Capriles’s campaign strategy, to a degree, is to admit that we’re all chavistas now. This time around he’s waged a more populist, more aggressive campaign that’s even reminiscent of Chávez’s tone, while Maduro is running a more defensive effort.

I’ve made this argument, though not as forcefully, previously before.

One way to look at this, though, is that Capriles has become dangerously populist — for example, he’s just as keen as Maduro to hike the minimum wage by 40%, and Capriles would do so immediately, not in a staggered way throughout 2013 — both would feed a worrisome inflation problem.  But campaign promises in the closing days of a campaign sometimes fail to find their way into policy.

Part of the argument in favor of Capriles simply must be a ‘throw-the-bums-out’ sentiment — the more nuanced version is to say that Capriles will not be constrained on day one to review and chuck out poor policies because he and his supporters have no vested interest in perpetuating the existing policy landscape.

It’s hard to believe that Maduro, ever the loyal soldier to Chávez, would have the institutional credibility within the governing PSUV, even after winning his own mandate, to stand up to the rampant corruption that now lies at the heart of Venezuela’s government. After a decade and a half in power, even governments in countries with more deeply entrenched respect for state institutions, separation of powers and checks and balances have a tendency toward corruption. British Columbia’s Liberal-run government faces ejection in May elections after just 12 years in power amid daily scandal headlines, for example.

It seems even less likely that Maduro could dislodge the other key policymakers that have directed the Venezuelan economy for over a decade, such as National Assembly president Diosdado Cabello, finance minister Jorge Giordani and energy minister Rafael Ramírez. So even if some inner-guard chavistas realize that Venezuela needs a new policy direction, Maduro will be hard-pressed to do so.

 

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Photo essay: A chavista party in central Caracas

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CARACAS, Venezuela — Today, on the final day of the campaign, chavistas from around the country have descended upon Caracas in advance of a rally in support of acting president Nicolás Maduro, and the enduring support of their fellow comrades from around the country in solidarity with the Bolivarian revolution.Venezuela Flag Icon

Some supporters came out and quickly donned Maduro-style mustaches — but in tandem with chavista red, the effect was more Super Mario than Super Maduro:

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One supporter even decided that opposition candidate Henrique Capriles needed a Maduro-style ‘stache too:

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Approaching Plaza Venezuela, small busloads of supporters began making their way to Avenida Bolívar.

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Continue reading Photo essay: A chavista party in central Caracas →

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Venezuela marks coup anniversary in leadup to election

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CARACAS, Venezuela — On April 11, 2002, a large band of opposition supporters marched on Miraflores — the presidential palace — were met by chavista supporters, and exchanged gunfire meters from where Hugo Chávez and his advisers were sitting. A handful of protestors died and ultimately, in the following hours, Hugo Chávez left power for 47 hours. Right-wing businessman Pedro Cardona shortly took occupation of Miraflores, though his suspension of the National Assembly and failure to secure the support of Venezuela’s army slowly isolated him, and the Venezuelan army itself restored Chávez to power on April 14.Venezuela Flag Icon

On April 11, 2013, exactly 11 years later, Chávez’s supporters, having freshly mourned their fallen leader last month, will mark the final day of the snap presidential campaign in a massive rally for his successor, acting president Nicolás Maduro, throughout Caracas.

I don’t want to spend too much time rehashing what’s now become history, legend, and political fodder. It’s famously difficult to know just exactly what happened back in 2002, whether it was technically a full golpe (a coup d’etat) or not, the full role of the army in both pushing Chávez (briefly) from power and restoring him, who opened gunfire on whose orders, or even how many people died. But it came in a particularly tense year of transition, and it’s generally accepted that the coup — much like the general strike later that year — came as a result of Chávez’s ultimately successful attempt to assert control over the state-owned oil company, Petroleós de Venezuela, S.A. (PDVSA).

The quintessential film on the subject, despite its pro-Chávez leanings, is a documentary, The Revolution Will Not Be Televised, shot by an Irish film crew that just happened to be in Miraflores working on a piece about Chávez when the April 11 events rapidly spun out of control.

Another account — one that I think gets closer to the heart of the matter, despite the fact that it’s written by someone who has decidedly anti-Chávez sentiments, comes from Francisco Toro, one of the authors of the Caracas Chronicles blog, which posits that both Chávez and his opponents, having played brinksmanship games for months, finally went too far, leaving the Venezuelan army in the middle to keep both sides from escalating the bloodshed that day.

Though it’s eleven years later, and there haven’t been any coup or near-coup attempts since, it’s not without some irony that the anniversary hangs over Venezuela tensely three days before voters decide whether to reward chavismo with another six years in office or to turn to opposition alternative Henrique Capriles.

There’s been some discussion in the Venezuelan media over whether the armed forces are being deployed to help get out the vote for the governing Partido Socialista Unido de Venezuela (PSUV, or United Socialist Party of Venezuela), though military officials have backtracked from that claim in recent days. Capriles in an interview with El Universal earlier this week forcefully argued that Maduro and the PSUV should respect the election results, and cautioned that the armed forces would be responsible to ensure a peaceful transition. Though Chávez managed to commingle politics into every aspect of the state — from PDVSA to the central bank to state government — the military has retained relatively more of a patina of independence from politics than other state institutions.

Polls, which are not quite accurate in Venezuela, gave Maduro an edge in the leadup to the election, but that doesn’t mean Capriles is hopeless — he won a tough reelection as the governor of Miranda state in an otherwise dismal set of regional elections in December 2012 after placing just 11% behind Chávez in the October 2012 election — a better showing than any of Chávez’s rivals stretching back to 1998. Maduro is no Chávez, and since the 2012 presidential election, Venezuela’s economy has only gotten worse, and there’s been no appreciable improvement in the standard of living, some of the continent’s worst crime and power shortages throughout the country.

Because everyone assumes that Maduro will somehow find enough votes to win the election, no one really knows how easily Maduro and the chavistas would transfer power. Continue reading Venezuela marks coup anniversary in leadup to election →

Venezuela

A diatribe against arepas — and food policy in the Caribbean basin

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CARACAS, Venezuela — I’ve basically had one meal since I’ve arrived in Venezuela, and in the spirit that the local cuisine is going to be the tastiest cuisine, I made my first meal arepas (pictured above), a ubiquitous cornmeal disk (some are more pancake-esque, others biscuit-esque) filled in this case with beef.Venezuela Flag Icon

It’s not that I want to throw shade on Venezuela in particular, but it’s stunning to me just how unhealthy food is in Central America and in the Caribbean — when you think about the tropical climate that the region features, you’d think it could be one of the world’s most amazing food traditions — think fresh fishes complimented by fruit-based salsas and the kind of salads that put health-conscious Californians to shame.

But the reality is a lot of fried food, heavy fare that seems somehow out-of-place in such a hot and humid climate, and I find that to be true throughout the region.

In Nicaragua, they’ve turned fried pork rinds (chicharrón) into a main dish. El Salvador’s contribution is the pupusa, a kind of cheese-filled corn disk. In Puerto Rico, the most well-known dish is mofongo, fried plantains that are mashed together (see below). Ubiquitous starchy fried plantain chips (patacones or tostones) are never hard to find.

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Throughout the Caribbean islands, fresh fish is routinely fried up (though sometimes mercifully grilled), and served with any number of heavy, starchy sides — in Barbados, ‘pie’ — what Americans know as macaroni and cheese — and french fries are a standard side dish. It’s not uncommon on the Colombian coast for a typical meal to include fried fish, rice or some other starchy dish, and some sort of fried plantain.

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Here in Venezuela, I also have to look forward to tequeños, a tight coil of fried white bread filled with white cheese, and I passed a stand earlier for cachapas, a kind of corn pancake.

Moreover, this region in particular has taken a liking to norteamericano-style fast food. Guatemalans are so taken with fried chicken that a flight from Guatemala City to the States isn’t a flight without the smell wafting through the boxes of furtively (and not-so-furtively) obtained chicken from the home-grown chain, Pollo Campero (see below).

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But why did the food culture of the Caribbean basin develop in this fashion, and what does it mean for the region’s future? Continue reading A diatribe against arepas — and food policy in the Caribbean basin →

Venezuela

Not a banana republic, but an avocado economy

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CARACAS, Venezuela — Since the end of the Bretton Woods system, or at least since the end of the ‘currency snake’ in Europe that preceded formal monetary union, it’s become difficult not to think about currency in terms other than a floating price determined on the free market.Venezuela Flag Icon

Sure, China still sets its own currency, and the renminbi may well be undervalued, but that matters less to China because its whole macroeconomic game is exporting. Manufacturers from a factory in Guangdong province assemble their goods, sell them to the United States, and promptly turn over their dollars to the Chinese government, which then exchanges them for renminbi. That’s how China ended up with such a glut of dollars in the early 2000s, and that’s why relatively fewer exports could mean fewer dollars, which could be one of the few market pressures to cause U.S. bond yields to rise after five years of historically low borrowing costs for the U.S. government.

Of crude oil and curses

But in Venezuela, there’s one major export — oil — and that revenue is in the hands of the government. In one sense, economics in Venezuela or in any other petrostate is pretty facile: when the oil price goes up, the country has a boom; when the oil price goes down, the country goes bust. That’s why the oil crisis 1970s and early 1980s were such a great time for Venezuela but such a bad time for the United States, why the cheap-oil era of the 1990s was so bad for Venezuela and, conversely great for the United States. It’s why Hugo Chávez was riding so high in the early 2000s, and why the brief drop in oil prices with the global financial crisis in 2008 and 2009 was bad for Venezuela as well as everyone else.

Unlike China, which had a $231 billion trade surplus in 2012, however, Venezuela’s trade surplus masks its growing dependence on imports, and so the key market for dollars is among those who import those goods (and for Venezuelans who want to take business trips — or shopping trips — to Miami).

For lots of reasons,there are disincentives for homegrown production in Venezuela. Many of those reasons have to do with the behavioral economics aspects of the ‘resources curse’ and the petrostate, but they also include the uncertain business climate under the last 14 years. Why start a farm in 2003 when the Chávez government might decide to expropriate it on live television in 2008?  So the country is increasingly importing even those products, such as fresh produce, that it could arguably grow for itself more efficiently. It’s even started importing refined oil products rather than develop the capital to clean the ultra heavy crude that comes out of the ground in Venezuela. A similar dynamic exists in Puerto Rico, where the U.S. government intervened in the 1950s with subsidies for industry during ‘Operation Bootstrap,’ thereby decimating the boricua agricultural sector to this day — produce in tropical San Juan is imported from Florida, Texas and California.

Of dollars and devaluations

Today, the official rate of the Venezuelan currency, the bolívar, is 6.3 per U.S. dollar.

But no one actually pays that, especially these days.

There’s a black market rate, rumored to be up to four times the official rates, a tourist rate that’s discounted a little from the going black market rate, and even a couple of weeks ago, when the Venezuelan government auctioned off dollars through a new system called SICAD (Sistema Complementario de Administración de Divisas) to currency-starved importers, they didn’t release the price for which the dollars sold, but it’s rumored to be something like between 10 and 15, which is quite a devaluation from the 6.3 rate.

It’s still technically illegal for local media to report any black market rates for the bolívar, of course — through March, at least, you could follow the price through a plucky Twitter account, which slyly presented the daily price for ‘fresh avocados.’ That account — and another one, for ‘fresh lettuce,’ shut down after Venezuelans, their businesses starved for vital dollars, lost their bolívares in a twisted online scam.

The new SICAD dollar auction comes after a formal devaluation in February, which lowered the rate from 4.3 bolívares to 6.3.

It’s fairly common for people to talk about two devaluations, in fact — the first formal devaluation of the official exchange rate from 4.3 to 6.3, and the second informal devaluation, whereby Venezuelans may have been buying dollars from the government for as high a price as 15 bolívares.

(Oh, by the way — the actual price of an avocado? I bought a huge one today for 60 bolívares. A tube of imported toothpaste manufactured in the United States, which is subsidized, costs just 20 bolívares. Another example of the distortions in a heavily-subsidized economy that depends on imports for many of its staples.) Continue reading Not a banana republic, but an avocado economy →

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Maduro campaign active on penultimate campaign day in Caracas

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CARACAS, Venezuela — One morning spent traipsing through Sabana Grande and Altamira is all you need to know who has the greater resources in Venezuela’s snap presidential campaign.Venezuela Flag Icon

It’s clear that election activity is very much in full swing. In the heart of cosmopolitan Caracas — and even in the eastern districts that are wealthier and which you’d expect to be very much behind opposition candidate Henrique Capriles — the more pronounced street presence belongs to the chavistas and their candidate, acting president Nicolás Maduro, the hand-picked candidate of his late predecessor, Hugo Chávez (pictured below in effigy in Altamira earlier today), notwithstanding a massive rally last Sunday on the Avenida Bolívar in support of Capriles.

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It’s astonishing the extent to which the Maduro campaign is really just a rehash of the October 2012 Chávez campaign — at one booth on the Sabana Grande, a Maduro volunteer handed me a poster of el comandante himself with a pamphlet describing Chávez’s 2012 campaign plan for the next term. While it’s a function of facility, there’s also certainly no electoral downside for Maduro in making Chávez very much his 2013 running mate.

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Capriles signs are few and far between, but they do exist and they are around, though I certainly didn’t see much in the way of boisterous caravans of Capriles supporters in the way that red-shirted chavistas paraded throughout the city today:

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I didn’t see much in the way of anti-chavista or anti-Maduro graffiti, though it’s very much in favor of Maduro — and in opposition to Capriles. Here’s one building with the words ‘un gran cobero,’ a slur that roughly translates to ‘big liar’ in Venezuelan slang, against Capriles that Chávez was known to use in the 2012 campaign:

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I’ve never been to a country with such a basketcase economy (more on that later), Maduro has less personal commitment and charisma than Chávez had, Capriles has run a much more aggressive campaign, and polls even showed the race tightening last week. So there’s really no way to extrapolate a Maduro victory just because the government has more resources to use to bring carloads of supporters out or to print more posters to hand out. But if one morning and afternoon stroll is worth anything (and it’s anecdotal, nothing more), Maduro has the upper hand — the key, of course, is whether the ground game on Sunday will turn out as effectively.

Photo credit to Kevin Lees.

Venezuela

The political geography of Caracas

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When you fly into Caracas, you fly into Maiquetía on the coast — at basically sea level, Maiquetía is everything you’d expect from a sweltering, languid coastal climate in the Caribbean.

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The coast is really just a narrow strip of land, the ‘Litoral Central,’ prone to mudslides and which has a coastal attitude separated from Caracas proper by a mountain — El Ávila, which rises 8,000 feet from the coast before cascading back down into a valley of around 3,000 feet.

That’s Caracas, there in the valley, which enjoys more temperate weather than the coast from which El Áliva separates it. But as the city has grown exponentially to include up to 3 million residents since its initial burst of oil-fueled growth in the 1950s, Caracas has expanded out from the valley and into the mountains above.

So when you come into Caracas, you drive first from the coast up to the mountains, where your first impression is a sea of shanties in the barrios overlooking the valley.

Though there’s an east-west socioeconomic divide (unlike London, Caracas’s east side is tonier), the central geographic feature of Caracas is that the higher up you go, the poorer it gets.  Like Lima (pictured below) or the famous favelas of Rio de Janeiro, the best real estate is owned by the poorest residents of the city.

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That’s ultimately at odds with the norm throughout much of the rest of the world, where the highest real estate belongs to the wealthiest. Think about New Orleans in 2005 — the wealthier Ninth Ward was spared the brute force of Hurricane Katrina that essentially destroyed lower-lying areas. Think of New York, and the consistent march of the aristocracy uptown in the 19th century. The same holds true of Los Angeles County and the Hollywood Hills, or of Montmarte in Paris or even cities like Port-au-Prince. I can’t find the link, but I’ve read studies that indicate this was because higher-elevation real estate was originally healthier when cities originally developed — farther from the sewage and other microbes further below.

Today, there’s not much risk of cholera or other 18th century illnesses afflicting anyone at any altitude in Caracas. But of course, much of the poverty in Caracas, and the corresponding violence that afflicts Caracas, (that’s made Caracas increasingly one of the most dangerous cities in the world), takes place in the barrios far higher than the valley below.

Top photo credit to Caracas1010a, bottom photo credit to Kevin Lees — Cerro San Cristobal, Lima, November 2010.

Venezuela

Does Venezuela need its own Margaret Thatcher?

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Though the snap Venezuelan presidential election — just six days away — will likely have huge implications for the country’s economic policy, and though most economic commentators would agree that Venezuela is in dire need of economic reform, neither candidate seems especially keen on discussing those reforms in a campaign that’s been heavy on personality and emotions.Venezuela Flag Icon

But the negative aspects of legacy of chavismo — a growing public sector and nationalized industries, ever-expanding army of bureaucrats, widespread power outages, crumbling infrastructure — sound an awful lot like much of the problems that the United Kingdom faced in the late 1970s.

Is Venezuela entering its own ‘winter of discontent?’  And if so, does it need a Margaret Thatcher?

When it comes to South America, Thatcher is most well-known for the Falklands War against Argentina in 1982 (see Thatcher pictured above during that war).

But one Venezuelan blogger has already argued that Romuló Betancourt, the first democratically elected president of Venezuela in 1958, was its ‘Thatcher.’  Betancourt’s major contribution was normalizing democratic elections and peaceful transfers of power, an institution that has so far continued in Venezuela without interruption, even throughout the chavismo era.  Economically, the Betancourt government’s most notable achievement was land reform that boosted rural peasants.

Perhaps the better example of Thatcherite economics in Venezuela is the second term of Betancourt’s successor (and one-time interior minister) Carlos Andrés Pérez (pictured below).  Despite presiding over the largesse of the oil bonanza that to the rest of the world was an oil crisis, Pérez (or ‘CAP’) returned to office with high hopes that he could unlock another era of plenty on a relatively populist campaign built on empty promises.

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Upon election, he rapidly sought a $4.5 billion loan from the International Monetary Fund, in return for crushing reforms that included a tax overhaul, a reduction in tariffs and custom duties and privatizations of state-owned companies.  But those reforms (the ‘paquete‘ or the ‘package’) most controversially caused the price of gasoline prices to rise (and the secondary price of public transportation) due to the elimination in Venezuela’s famous gasoline subsidy — to this day, Venezuelan gas prices are the lowest in the world, and Venezuelans believe cheap gas is practically a birthright.

The reforms led directly to the Caracazo riots in Caracas on February 27, 1989 — as Francisco Toro and Juan Cristobal Nagel write in their wonderful compilation of 10 years of blogging about chavismo (from an opposition viewpoint), the Caracazo marked an incredible rupture in Venezuelan life:

Until then, Venezuelans had seen themselves as different, more civilized, more democratic, better than their Latin American neighbors.  Thirty-one years of unbroken, stable, petrostate-funded democracy had made us terribly cocky.  In a sense, the riots market Venezuela’s re-entry into Latin America.  The country was no longer exceptional: just another hard-up Latin American country struggling to put its democracy on a stable footing.

Those riots ultimately led to the dismantling of Venezuela’s two-party system, CAP’s impeachment in 1993, and two coup attempts in 1992 — one in February 1992 by a little-known lieutenant colonel named Hugo Chávez, who would of course take power by democratic means just six years later in a landslide election victory.

So if Thatcherite policies ultimately paved the way for chavismo, could chavismo pave the way for a countervailing turn back to neoliberal reforms?  Fast-forward two decades, and the country with the world’s largest proven reserves of petroleum finds itself with a budget deficit last year that equalled 17% of GDP and a public debt burden that’s now equal to 50% of GDP.  So if he wins the presidential election, Chávez’s anointed successor Nicolás Maduro will have far fewer economic tools at his disposal than Chávez did to achieve his goals.

Opposition candidate Henrique Capriles certainly isn’t going around the country advocating the elimination of gasoline subsidies, but Capriles seems far likelier than Maduro to enact the kind of policy reforms that could balance Venezuelan finances back toward a more stable equilibrium.

But say what you will about the positive aspects of chavismo in reducing poverty in Venezuela and giving voice to a largely forgotten underclass excluded from the country’s oil wealth for a half-century, Venezuelan finances are hardly in great shape, and the winner of Sunday’s election will face significant financial pressures — all the more so if oil prices fall over the next six years.