And as Thatcher always said: The problem with socialism is that, eventually, you run out of someone else’s money… As Trump said: The problem with Venezuela is not that socialism was implemented badly but that it was implemented perfectly… Read on… Yet ONE more example of a country ruined by posturing “good intentions.” Where’s Jimmy Carter when you need him? Off to North Korea?
Venezuela, the South American country convulsed by economic and humanitarian catastrophe, has defaulted on some of its debt after missing an interest payment due in October. Even as investors meet in Caracas to discuss restructuring US$60 billion in foreign debt, the country is in urgent need of international financial assistance.
Yet few nations are rushing in to offer financial assistance to the ailing country. Under the authoritarian regime of Nicolás Maduro, Venezuela is isolated in Latin America, and the United States, Canada and the European Union have all imposed sanctions against Venezuelan officials. Maduro has at times suggested he would not even accept humanitarian aid.
Before exploring a possible Venezuela rescue, it is useful to understand how the country’s debt became such a burden. In 1998, the year before the late Hugo Chávez came into power, Venezuela was rich. It produced roughly 60 barrels of oil per inhabitant per year. By late 2017, my projections - based on data compiled from Venezuela’s National Statistics Institute and BP’s World Energy Report 2017 - show that production will have dropped to 20 barrels per capita. That’s a 66 percent drop in 20 years.
Even as output steadily shrank, Chávez benefitted from relatively high oil prices, which allowed him to boost revenue from petroleum exports. And as oil sales rose, so did government expenditures, as well as imports of food and other goods.
> Eventually, excess spending took a toll on Venezuela’s international reserves. Rather than cut expenditures and imports, the Chávez regime piled up foreign debt.
Then, in late 2014, international oil prices began to plunge. Today, estimates indicate that Venezuela’s public sector debt tops $184.5 billion, including $60 billion in foreign debt, though the Venezuelan Central Bank claims it’s much lower.
To service this debt, the government must pay $16 billion to $20 billion a year through at least 2022. Shouldering that huge expense has meant slashing imports, causing food and medicine shortages. As a result, almost 54 percent of Venezuelan children are malnourished.
To ensure its citizens’ basic well-being, Venezuela must be able to import, on average, $1,000 a year per inhabitant - or roughly $33 billion a year. My data show it’s currently bringing in about half that.