Venezuela is Latin America’s trust-fund kid

For many outsiders, and many insiders too, Venezuela is maddeningly hard to understand. For some, it has been a socialist utopia; for others, a dictatorship. Neither fully or usefully explains how a country with the world’s largest oil reserves also suffers toilet paper shortages. So here is another point of view.

Strip away the ideology, and Venezuela is an out-of-control trust-fund kid: gauche, confused, spending more money than it has, addicted to oil revenues and in denial about that addiction too. Absurd? If you had $3tn-worth of oil reserves in your private account, you might end up the same.

Venezuela, like many dysfunctional “Trustafarians”, suffers from unreality. It always has. During the 1970s oil-price shock, miraculously inflated petro-revenues briefly created the crass consumerism and pharaonic dream of a “Gran Venezuela”. The late Hugo Chávez’s vision of a pan-American “Bolivarian revolution” is only the latest heady delusion. (It is named after Chávez’s 19th-century hero, Simón Bolívar, for whom he reportedly left an empty chair at cabinet meetings so Simon Bolívar’s ghost could sit in.)

However, Venezuela, like all stoner trust-fund kids, also has periodic sober awakenings, especially when its trustees – the International Monetary Fund, say – insist that it is time to straighten the accounts, sell the sports car and get real.

These are painful moments for addicts everywhere who, if they are to kick the habit, require unflinching self-reflection at gruelling 12-step meetings (in the jargon, “structural adjustment plans”). Venezuela has had two such episodes, in 1989 and 1996. But their harsh realities can push the addict off the wagon into another binge. The next day typically brings affliction, a sense of hopelessness and loss of status, ideal conditions for religious transcendence.

For Venezuela that born-again moment came after Chávez’s election in 1998, when he formulated his creed of “21st-century socialism”, an idiosyncratic blend of anachronistic ideology, regional solidarity and social programmes. It also allowed Venezuela to continue its stoner ways, only with renewed self-justification. Rising oil prices only meant the trust fund rose in value.

Chávez splashed the cash. At home he redirected oil revenues to the poor – not for the first time in Venezuela’s largely social democratic history but on a far larger scale than before. He also bought friends abroad.

There were opportunistic Cubans, liggers extraordinaire, who receive subsidised oil in return for medical and intelligence services that Venezuela cannot provide itself (in Havana, it is striking the contempt many Cubans have for their Venezuelan counterparts – for their incompetence, their inefficiency, for simply being fat).

There were also Russian arms dealers; energy-hungry Chinese, happy to lend against future oil deliveries ($50bn so far); and some of the truly needy, such as the region’s poorest nations.

This patronage rebuilt Venezuelan self-esteem and, crucially, the welfare of its poor (as well as being an invaluable propaganda tool). It was also a return to the ways of old – only even more mismanaged, wasteful and corrupt than before. Weakened institutions may well prove Chávez’s most unfortunate legacy.

The high is wearing off. The economy is on the ropes. Inflation, at more than 57 per cent, is eroding social gains. Sapped by under-investment, the oil industry no longer pumps the revenues Venezuela needs.

Political life is violently polarised: street riots have left more than 40 dead and hundreds wounded. It is time to get sober. Yet, like many addicts, Venezuela seems in denial. Even gentle critics, such as the salsa singer Rubén Blades, are dismissed as imperialist stooges.

When this happens, it is time for a “family intervention” – a tense moment when concerned relatives reluctantly confront the addict with the error of his ways. Hence the Vatican and Latin America-mediated peace talks that have taken place between the government and the opposition.

Some fear the government is simply using them to gain time, and in the end will only dig in and repress. Certainly, there is suspicion and hurt feelings on both sides. Politically, the central question is: will Venezuela’s democratic traditions hold?

Economically, though, sobriety is the only option. The situation appears unsustainable. Corrupt insiders will not surrender easily their privileges, such as access to subsidised hard currency. But at some point the political cost of doing nothing rises above the cost of reform. Then we might see a quasi-socialist government execute a tough adjustment plan. Perhaps it has already begun.

Whether Venezuela can see it through is another question, because after 15 years of chavismo and lavish spending, Venezuela – the wayward trust-fund kid – has only become more Venezuelan. The comedown will be trying indeed.


John Paul Rathbone


Fonte: FT