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Venezuela: Bad diplomacy, worse economics

During my days in economics school, one of the countries that were held up as one of the most fortunate economies in the developing world was the Latin American country of Venezuela. Located close to where Central America links up with the South American continent, Venezuela—the Spanish conquistadors gave the land this name because of the resemblance of the inhabitants’ dwellings to the houses of Venice—had much going for it. The fourth largest oil reservers in the world, fertile Amazon-drained land, a small and industrious population—Venezuela appeared to be destined for eventual First World status.

How different things are today in Little Venice. What is happening today in Venezuela—particularly in the domain of economics—is one of the saddest and most pathetic spectacles in the whole of Latin America.

What happened in the intervening period? The short answer is, Hugo Chavez happened. When the flamboyant colonel— a paratrooper no less—passed away several years ago after serving the constitutionally allowed two terms, he was succeeded by his deputy, Nicolas Maduro. What the Venezuelans call Chavismo has been continued in full by Maduro.

Chavismo was the name given to the whole gamut of policies—diplomatic, political, economic and social—that Hugo Chavez brought into play in governing, or misgoverning, Venezuela. Especially diplomatic.

Like his friend Fidel Castro, the longtime dictator of Cuba, Hugo Chavez appeared to be a friend of the US during his first years in office. The Venezuelan president’s anti-Americanism gradually began to show, and by the end of his life he was every bit as anti-US as his pal Fidel Castro. He did not insult the mother of America’s president, or tell him to go to hell, but President Rodrigo Duterte would have been proud to be called Hugo Chavez’s friend.

Through all the years of anti-American diatribe emanating from Caracas, the US could only grin and bear it. The reason? Venezuela was the US’s third largest foreign supplier of oil. Thanks to the nature of oil and to the circumstances of the world oil market, here there was a bizarre case of an exporting country treating its No. 1 customer badly.

In the meantime, self-proclaimed socialist—sound familiar?—Hugo Chavez generously distributed the proceeds from Venezuela’s oil reserves among the citizenry, especially the poorer classes, maintaining a national budget that provided free education, healthcare and other goodies to his country’s masses. Little wonder that the paratrooper-turned-president remained very popular with Venezuela’s poor.

The gravy train could continue chugging for as long as the price structure of Opec (Organization of Petroleum Exporting Countries) stayed strong and the US remained heavily dependent on Venezuelan oil. Unfortunately for Venezuela – and for Chavez—those two conditions did not hold. The world recession that began in 2008 sharply reduced world demand for oil, and thanks to the improved technology for shale oil extraction, the US began moving in the direction of self-sufficiency in oil.

Now no longer heavily dependent on Venezuelan oil, the US began to take a tougher stand against Hugo Chavez. It worked to isolate the Venezuelan president in the OAS (Organization of American States), to which all Central American and South American countries belong. The re-establishment of diplomatic relations between the US and Cuba after 50 years of estrangement completed the diplomatic isolation of Venezuela.

Predictably, the socialist expenditures which Venezuela’s government had maintained for years brought the nation’s budget to near-ruin, and the sharp decline in Venezuelan oil revenues brought the gravy train to a screeching halt. The long joyride, punctuated by Hugo Chavez’s unrelenting animosity toward Venezuela’s No. 1 trading partner, had come to a long-overdue end.

Today, all the news coming out of Venezuela is laden with sadness and desperation. Government employees are not being paid on time, if paid at all. Businesses are closing and jobs are being lost steadily. Both foreign and local funds are leaving the country. And, most ominous of all, store shelves are becoming empty.

Are Maduro and his fellow-leaders still insulting the US and telling Washington to go to hell? Certainly not. Those demagoguery days are over.

It is possible that President Duterte is modeling his administration’s—and especially his own personal—diplomatic philosophy on Chavismo and its extension. If that is the case, the Man from Davao has some lessons to learn from the chaos and disarray in Caracas.

Topics: Rudy Romero , Venezuela , Bad diplomacy , worse economics
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