Venezuela is a country on the northern coast of South America
The World news reports of a growing crisis in Venezuela, but not many of us actually know or understand what is going-on there, do we? No, well not within the UK certainly, but those people elsewhere, like say America, may be closer to the historic situation, perhaps?
What the news tells us is that Venezuela’s dictatorial President Nicolás Maduro is facing both country widespread public demonstrations by street marchers demanding the end of his vice-like vicious grip on power, and international pressure to go, and that included demands from Britain, France, Spain and Germany, that Maduro held a fresh presidential election [The parliament is already controlled by the opposition – led since the start of the year by one Juan Guaidó].
[First elected in 2013, the second term of incumbent Nicolás Maduro’s presidency of took place just in January, but his re-election last July has been declared ‘invalid’ by various figures, organizations, and countries. That was because the process lacked legitimacy, there was a ban on the most popular rivals, there was a liberal use of state resources in Maduro’s campaign, the main opposition boycotted it, more than half of the electorate refused to vote, plus evidence of intimidation & vote buying, and other irregularities), whence Juan Guaidó has been elevated to Interim President in accordance with the Venezuelan constitution.
United States, Canada, UK, Spain, France, Sweden, Denmark, Austria, Brazil, Argentina, Colombia, Ecuador, Guatemala, Israel, Latvia, Netherlands, Lithuania, Portugal, Finland, Poland, Germany have all now recognised Guaidó as Interim President].
Now, this is not a crisis that has come out-of-the-blue, is it? Not at all, as it has been brewing for countless years, but things have finally reached critical-mass because the Venezuela government is completely isolated, the moribund economy has ruinously crashed, the community largely is poverty-stricken, there is no food, the health system has buckled and there are no medicines, and the people are aggressively demanding a return to democracy and freedom – well the ones still there are that is, as it seems that some three million of them have already fled the country mainly to U.S. & Spain (if they have means) or Chile & Brazil (if they have less means) with half of them in the past 4 years, eh?
Hyperinflation: Venezuela’s exchange rate regime provides no discipline it only produces instability, poverty, and the world’s highest inflation rate – its annual inflation rate at the end of 2018 was 80,000% and growing
While it would seem that massive population protests so far have reportedly been relatively peaceful, nevertheless the risk is that these evolve into a bloodbath, as there are thuggish, armed, revolutionary pro- Maduro government groups (who somehow are the ones to have food in their bellies) who are prepared to fight to the end for the President, no less?
Historically, these ‘colectivos’ have had power, have obtained funnelled money and arms from the state, became political enforcers (often lethally), so even challenge the police for control, and help deal with streets protesters – the population rightly have learned to fear these men.
What happens now though in Venezuela lies primarily in the hands of the president’s specially selected, patronage benefiting, corrupt, military, which has in the past played a key role in supporting the regime and has been the means of Maduro enforcing absolute control – which shockingly has included his rejection of an international humanitarian aid corridor through Brazil and Colombia to deliver desperately needed medicine and food.
There are strong indications though that the military dam may burst soon and its senior officers turn on the beleaguered dictator (rank-and-file solders have been leaving at an alarming rate – over four thousand in five years and others are barred from leaving the country). If the Generals crack in the face of fresh massive street demonstrations then Maduro’s days in the Miraflores presidential palace after some six years of chaotic rule, will finally be well and truly over, won’t they? [He may be heading into exile but will the armed colectivos group revolutionaries back-off, or risk being eliminated by the antagonistic army, perhaps?]
Oh yes, there are the fellow-travellers who support this disastrous Venezuela dictator and we can all guess who they are, eh? Their communist Marxist allies of Russia, China, Turkey, Syria, Iran, Belarus, Bolivia, Venezuela, Nicaragua, and Cuba
However, to understand any of this you have to turn the clock back twenty years to when Venezuela, due to its oil production and its massive reserves of oil, was an affluent country and the richest economy in South America, with all of its mostly urban and educated population having access to clean drinking water, sanitation facilities and electricity, don’t you?
[For the record in 2019, water, sanitation, electricity, medicine, money, and even food, are all either rationed or unavailable]
Back in 1999, that was when Hugo Chávez became President of Venezuela, and in a disastrous social-justice escapade to redistribute wealth from business to the State, well-off to poor, he set about implementing his revolutionary ultra-left-wing ideology (Chavismo), which was enacted with brutal suppression and he simply destroyed the former Venezuelan democracy, eliminated independent media, and controlled justice and the courts. His social policies resulted in government uncontrolled overspending, caused shortages, and allowed the inflation rate to grow like Topsy
He made war with the oil sector and sucked-out its wealth, deskilled PDVSA the state-run oil firm, and purloined its capital resources to fund social programmes, whilst establishing a corrupt elite. Consequently, essential oil production dropped dramatically and even despite a global boom in oil prices, production facilities weren’t maintained, major accidents happened, necessary reinvestment stalled
Significantly, the curtailed PDVSA has failed to bring new oil fields onstream since Chávez nationalized heavy oil projects in the field formerly operated by international oil companies ExxonMobil, ConocoPhillips, Chevron and Total – what does that tell us, eh? His policies damaged the country’s oil industry due to lack of investment, massive corruption, and cash shortages and when oil prices dropped 5 years ago, all was lost – the Venezuela economy was trashed
His revolution with its expropriations, foreign exchange, price, labour and profit controls, simply destroyed the normal market mechanism that keep a country’s economy in check. Moreover, the country has borrowed massively at high cost so has unacceptably large foreign public debt. Consequently, Venezuela has lost access to international capital markets, creditors are threatening to lay claim to its assets abroad, and others demand some £7 billion in overdue bond payments.
When Maduro took power after Chavez died in 2013, he inherited an economy that was in a shamble, but he continued with his mentor’s policy and his answer was to parcel-out patronage, while the criminality in the military, took control of lucrative drug and food trades, as well as illegal gold mining.
Unbelievably perhaps, instead of trying to reverse his country’s unprecedented economic collapse, Maduro with a former bus driver’s financial skills no less, embarked on a financial strategy of a frenzy printing of base money to cover large budget deficits, so Inflation was driven upwards at an astounding rate, basic goods became unaffordable, businesses collapsed so more than half of them are gone now, imports dropped, and food became unavailable.
Money devalues and becomes worthless if too much is printed. If the money supply increases faster than real output then, all other things remaining equal, inflation will occur. If you print money excessively there will be more cash to spend on goods, but if the amount of goods doesn’t change, there is more money chasing the same amount of goods, hence prices simply go up – inflation gets out-of-hand and investors lose trust in the government who will find it hard to borrow [Venezuela as an example]
This situation resulted in what constitutes a mafia state, and created a violent black-market environment, with the vicious colectivos increasing in control, who together with armed police and military units turned the streets into blood-baths.
Venezuela has been brought from a state of wealth and democracy, with one of the largest proven fossil-fuel reserves in the world, to the one of dreadful collapse in just two decades, simply because of a totalitarian regime’s successful battle against wealth creation, in pursuit of an extreme socialist dogma, that inevitably destroyed the country’s prospects. Even a decade ago crude oil production in Venezuela was the tenth-highest in the world and the country was also the eighth-largest net oil exporter in the world. In the 20 years since Chávez came to power, crude oil production there has sunk by 40%. The two presidents of Chavismo ideology have allowed the oils sector to decline to unbelievable depths that has impoverished their people. The poor are even poorer while the middle class have been virtually expunged
Oh yes, in support of the population, the US imposed financial sanctions on Venezuela two years ago and prohibited US citizens from doing business there when Maduro suspended constitutional rights and instituted changes to the constitution to enhance his dictatorship powers – that certainly hasn’t helped the Venezuelan economy, has it? Nevertheless, the country is facing even more sanctions if Maduro doesn’t stack and give way to Guaidó, doesn’t it?
The inherent risks of further escalation of the Venezuela crisis cannot be overlooked and it has to be stopped quickly, as the country is spiraling into a failed state (some say it’s there already), and that would trigger region-wide consequences with serious economic, financial, and security
If Maduro goes quickly and with Chavismo ditched, Venezuela can begin a trek along the difficult road to recovery and to the ending of existing sactions, under a new regime. The immediate need is to dramatically increase oil production, as oil is at the centre of the Venezuelan economy and accounts for 95 percent of that country’s export revenues – this will not happen unless the new President brings back the international oil giants to repair and expand its fields, as PDVSA itself is simply not up to the job, is it?
It is likely that Guaidó will introduce an amnesty for police, military and authorities to help remove Maduro and to restore constitutional order. Most certainly he will accept humanitarian aid from the US and other countries and allow in international shipments and convoys to partly mitigate the current humanitarian emergency. He will need to seek international backing and support in unlocking foreign assets and gaining control of US and other overseas financial accounts. He will also have to negotiate the lifting of sanctions as soon as possible
Even more importantly he will have to face-up to the problem of more than £70billion in outstanding debt, the bulk in default. He needs to find a solution to halt the immediately impending fight over this crippling Venezuela debt and work with the World Bank and IMF to get the domestic economy back on its feet. That could be partly achieved by America declaring Venezuelan assets temporarily immune from attachment by U.S. courts, just as Obama did previously with Iraq for 3 years by using a national security executive order – Trump has said that he will support Guaidó in Venezuela, but will he do it, with this one huge effective step, eh?
[Despite the dire results emanating from Chavez’s & Maduro’s tenures in office as Venezuela presidents, our close at home Marxist/ Trotskyist/ Leninist/ Stalinist/ Maoist orientated ‘Jeremy Corbyn’ had praised him after death for his actions, and had then immediately supported his successor– while his maverick sidekick, wealth redistribution intent ‘John McDonnell’s’ view has been that what was going-on in Venezuela was socialism in action. Beware then, that is what kind of regime of state socialism that these two communist apologists, who currently lead the (Marxist infiltrated via Momentum) iconic British Labour Party, want to inflict and impose on the UK, as they have made crystal clear in the past – and that is not the kind of socialism the British people want, nor will accept]