Hail Venezuela’s Libertador

The other day I read something curious, some similarities between Juan Guaidó and Simón Bolivar:  They were born exactly 200 years apart (1793 and 1983, respectively); they both ascended to power at 200 years apart (1819 and 2019, respectively), and both were hailed as Venezuela’s Libertador. There were a bunch of other similarities in the article but after a while it gets boring, so I omitted them.

When you talk about Venezuela, the first thing that comes to mind (especially in Spanish) is to say “pobre pais” translation: poor country.  Many would argue that Venezuela is far from poor.  It is one of the richest oil producing countries in the world, yet people don’t have food, medicine, or toilet paper. My first blog: Time to Short the Venezuelan Bolivar, posted about 3 years ago, dealt with the notion that Venezuela was going down the tubes, and how shorting the currency would make a killing if you find someone brave enough to be your counterpart.

The current state of Venezuela’s economy is not unexpected; the scale of it is shocking though.

“The trouble with Socialism is that eventually you run out of other people’s money.” – Margaret Thatcher

Venezuela is a clear example of what happens when socialism runs amok.  Margaret Thatcher couldn’t have said it better: “The trouble with Socialism is that eventually you run out of other people’s money.” This is exactly what happened in Venezuela: they ran out of other people’s money.

Venezuela has experienced 20 years of XXI century socialism, which is nothing more than comunism by a fancier name.  In those 20 years, the country has been destroyed beyond recognition.  It started with Hugo Chávez being elected president.  During his first term he raised taxes, expropriated businesses and properties, and gave the people lots of freebies.  He also grew the size of the State to outrageous levels, which resulted in him being easily re-elected, since over half the population depended directly or indirectly on the government for food, housing, medicines, or something else.  Basically, you were either working for the government, or leeching off it.

At this point, began the biggest brain-drain Venezuela has ever seen.  Many of Venezuela’s brightest minds migrated to America, fellow Latin American countries, Europe, or the Far East; taking with them their money, their businesses, and most importantly their intellectual capabilities.  That is when Venezuela’s downward spiral began.  A few years later Chávez died, and what could’ve been hailed as a lifeline for the country was quickly revealed as a death stroke.

Nicolás Maduro took over as president.  Chávez’ hand picked successor, began presiding over a broken country (not yet bankrupt, but broken).  A country with no production, no commerce, no banking, no industry, no agriculture, and a nationalized crude oil industry that expropriated business from the likes of ConocoPhillips and Exxon Mobile.

“Expropriation, for lack of a better word, is theft of private property by the government.”

For my first-world readers: expropriation, for lack of a better word, is theft of private property by a government.  When there is talk in the UK about re-nationalizing the railways, the average reader understands that the government will buy the properties from the private companies, paying fair market value for them.  In Venezuela it means the government will steal them from their rightful owners.  Think Bolchevik Revolution, or Castro’s rise to power in Cuba.

So, what are they left with? A government with ever increasing spending and ever decreasing income, a lot of oil with no one to extract it, and a lot of people used to getting free stuff with no people to get it from.

During the first decade of the XXI century, there was a massive brain drain.  Everybody who could, left Venezuela.  They have established themselves in their fields, have families, friends, and are very unlikely to return.  The second decade, saw a mass exodus, desperate people trying to flee the country and go anywhere to be able to find food, medicines, education, or a better life. The last couple of years has seen migrations of criminal gangs, and all kinds of low-lifes.  When criminals leave a country because there is nothing left to steal from it, is when you know it has touched rock bottom.

Enter Juan Guaidó.  The president of the Venezuela’s National Assembly, who according to some articles in Venezuela’s constitution (which I am not going to bore you with), legally assumed the intereim presidency of the country until new elections can be called. The US, Canada, and Brazil were the first to show their support, followed by many more countries.

While this happens, Maduro is sitting tight.  As long as he has the support of the armed forces, he shouldn’t have a problem clinging to power.  How easy or hard will it be for Guaidó to flip them in his favor is yet to be seen, but one thing is for sure, should the armed forces not align with Guaidó, there could be a civil war breaking out any time soon.

In my next article, I will explore the economic prospects for Venezuela in the years to come.