The horizon is not so far as we can see, but as far as we can imagine

The Venezuela edition of “imports will kill’ya”

So, the New York Times has an article on how Venezuelan stores are running out of basic goods, because they import so much, and with the drop in oil prices, they don’t have enough hard currency to buy what they need.

Repeat after me for the 100th time, “all resource booms end.”

All of them.  Always.  Gold, oil, rubber: it always ends.  Period.  The question is only when.

Back around 2004, myself and Stirling pointed on the late (and defunct) BOP News that Chavez was screwing up his revolution.  That’s not a way of saying I disapprove of his goals, I very much agree with what he was doing in general terms. But in specific, he was not making his country independent of high oil prices.

What a country needs it must either be able to produce, or have product it knows it can sell to someone who can produce what it needs, and who is a reliable partner. (No Western country is a reliable partner to an actual left wing revolutionary government.)


If you do not, things may go well for a long time, but you are ALWAYS vulnerable to the hegemonic economic state and its allies.  Right now that’s the West.  For a long time, if the West were jerks to you, you could run to the USSR, but right now there is no complete replacement, though China, as leader of the BRICS, is coming on strong.

Note that when the USSR fell, Russian support for Cuba almost entirely went away.

It was a huge shock, but Cuba survived it.

Chavez was a great friend of Castro’s, but he did not learn from Castro.  He did not figure out how his country could survive being cut off from what amounted to essentially it’s only source of support (in his case, oil sales).

Now Venezuelans pay the price.

Learn the lesson.

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Is Declining Violence Only A Good Thing?


My thought in two compendia


  1. V. Arnold

    Gold? I’ll need you to explain that. When has gold not been valued/valuable?
    Other than that quibble, I agree with what you wrote.
    Fortunately I landed lucky; S.E. Asia is predominately agricultural and still feeding itself 100%.
    Any food imports are usually luxury goods, such as western food products. But outside of large cities, the availability of those goods is very limited.
    A decent meal (traditional) for lunch is $1 USD or less; dinner can be the same or slightly more at $3.00 for two.
    America is failing badly here, thank the gods.
    Because Venezuela has oil its been targeted by the U.S. for control and domination. It will take a very savvy and determined leader to continue to counter the U.S. assault on its sovereignty.

  2. Ian Welsh

    Take a look at a chart since the price was released. The price of gold was quite low, for a long time.

  3. DMC

    You’d think it was all as simple as “Don’t put all your eggs in the same basket”. Before the crash, gold was $800 an ounce and it shot up to $1600 in about a year. Silver has been crazy volatile for years by contrast. Its always “valued”, its just a question of how much. Same for a barrel of oil. Venezuela’s cost of production was only letting it make money on oil while the price was high.

  4. V. Arnold

    @ Ian

    I’ll never forget my ex-Ukrainian father in law describing post WWII Germany; bread could only be bought with gold. That forever locked in its importance in financial collapse.
    Gold’s value is in what it can buy in collapse; dollars mean nothing; currency means nothing; gold means everything…
    That’s where I’m coming from; think about it…

  5. Ian Welsh

    Gold was valuable then for psych reasons.

    You know what I’d stock? Cigarettes and various pharma drugs.

  6. V. Arnold

    @ Ian

    Yeah, maybe all of the above.
    But here in Asia, gold rules. Historically it always has.
    When in Rome… 😉

  7. Ian Welsh

    In the birthplace of money, Mesopotomia, silver ruled. 🙂

  8. V. Arnold

    Hey, I’m equal opportunity; silver’s good… 🙂

  9. V. Arnold

    A short anecdote (re; Asian culture):
    When I bought my wife an engagement ring, I wanted a platinum ring (I was working as an engineer at the time). Initially my wife objected because it looked like silver.
    But when I explained it exceeded gold in value, she was okay with it.
    Funny how perceptions work, no?

  10. Ian Welsh

    The main thing about gold is the non-reactivity. A big deal in anything you’re going to wear all the time.

  11. V. Arnold

    @ Ian

    Yes, but, non-reactivity? Hmm.
    Yes, I see that as value, true.
    This leads me to Jade, a gem the Chinese value highly, and where, it needs to be in contact with their bodies.
    Have you ever seen imperial jade? It defies description in its beauty. Native Americans have a word that defies definition when describing the beheld beauty of an object: Zot.
    Imperial Jade is Zot.
    And beyond my mortal ability to describe…

  12. batalos

    ‘he was not making his country independent of high oil prices.

    What a country needs it must either be able to produce, or have product it knows it can sell to someone who can produce what it needs, and who is a reliable partner’

    – He tried actually. But that’s a VERY hard task…

  13. Ian Welsh

    He tried. Yes. He failed. At the time I wrote on some of the details of why he failed, it wasn’t all external, some of it was just incompetence. (No, I’m not going to rewrite that article now.)

    Don’t get me wrong, it’s HARD. But if you want to be a left wing revolutionary type, you MUST figure it out.

  14. Until quite recently gems were considered magical by many many people and some gems were said to have more potency when worn against the part of the body the gem was supposed to affect, such as heart, head, or liver. Turquoise beads were placed on bridles to protect horses from falls. Coral necklaces were put on babies to protect them from evil spirits (and for teething).

  15. wendy davis

    Wow, that was some concern trolling in the NYT piece, eh?

    Of course you’re right about growing, manufacturing what your country needs. But do remember that there are many deep state organizations, as well as the local opposition party, trying to make sure that socialism fails in Venezuela. I suppose it’s down to whose tales one believes, but there have been ample reports of the opposition hiring Colombians to steal whole warehouses full of commodities and taking them over the border; the opposition burning down schools, libraries, and other beneficial commons.

    The plan to kill Chaismo has been underway since before 2006, but you might be interested in reading some of the WikiCables about the planned plays, plus Eve Golinger and/or Mark Weisbrot on current events in VA. I’ve written about events there different times; this is the first one I dug out of the cache.

    But no, no matter what: making Maduro into a laughing stock is one of the best and easiest ways to discredit Bolivarian socialism. It’s begun already in Greece; Syriza won’t catch many breaks from the world press, either.

  16. oil was on my blog for a reason

  17. Juan Bimba

    ” That’s not a way of saying I disapprove of his goals, I very much agree with what he was doing in general terms.”

    You lost me there Mr. Ian, if you don’t mind allow me to correct you on your perception of the economic model Chávez’s government crafted, and which is currently collapsing on its own weight.

    The whole point of Chávez’s economic model was political control of the population by having the government destroy or confiscate local industries and replace them with imports, so the people would have to become subservient to the government, at first it could be maintained by burning the extra income from the oil prices into imports and social programs that would dissimulate the unemployment rates, now that oil prices dropped, those can no longer be maintened, and unsurprisingly enough there are not enough local industries to produce goods needed by the people, and the few that still exist can’t get access to dollars they need to buy equipments and raw materials.

    Did you know that since January 2003 Chávez enacted a currency exchange control, which completely takes away the people’s right of using their own earnings and exchange them in another currencies, leaving Venezuelans completely isulated from the entire banking network save by yearly “allowances” the government authorizes only to those who do have credit cards and may be able to pay an airplane ticket?

    The excuse Chávez gave to implement that currency exchange control was that allegedly powerful economic groups were trying to suck dry the Central Bank’s reserves (the Venezuelan bolivar is, at least in theory, representative money, whose value is backed up by the gold, dollars and euros on the International reserves) and knock down the bolivar’s value, yet over the years, after initially reaching a peak caused by oil prices higher than previewed in every year’s national budget, while the goverment had full control through an absurdly complicated bureaucracy of every dollar that made it in and out of the country, the Central Bank’s reserves have been progressively diminishing, and as of now there are not enough dollars in them for the government to maintain the massive import politics Chávez built when he was still alive, causing massive shortages in basic goods such as milk, chicken, cooking oil, sugar, toilet paper, and others, mostof which used to be produced here and are now goods mostly imported by the government itself ever since corrupt and incompetent officers took control of once-productive plants and farms and turned them into fiscal holes PDVSA had to cover for.

    This without even mentioning the tragedy of how gasoline is becoming scarce due to the deterioration of PDVSA’s refineries and PDVSA finding itself unable to keep its oil extraction levels and resorting to import oil from Algeria and Russia.

    To give you an idea of how the currency exchange control affects the “Juan Bimba” (Venezuelan equivalent to “John Doe”) in situations such as wanting to travel to the neighboring country either to visit family or leisure, Imagine that you wanted to take a trip to Seattle for a week. Perhaps you might consider driving or taking a bus to do the route, to cover your expenses you may think you can use your credit or debit card in any point of sale terminal the stores, restaurants and hotel you may use have, as long as your credit line can cover for it; and if you want some cash you can either put your debit card in an ATM to substract in USD any amount you may need as long as it is within what you have in your bank account, or simply exchange some pocket CAD for USD in a currency exchange house.

    Well, under the conditions Venezuelans live at, such basic conditions of economic freedom are denied, Venezuelan debit cards are rejected by ATMs (due to the government’s restrictions, not by some right-wing conspiracy), and if you want to be able to use your credit card, you have to file a permit to the government through the bank that emitted it, a permit in which (among other things) you have to show the airplane ticket to the bank manager and leave a copy in it so the government can be sure of knowing you’re really travelling (there go the options of driving and taking a bus, hope you can afford the airplane ticket regardless of the short distance), and in case you get approved, the cap of how much you can spend will not be limited by your credit line, it will be by a cap the government sets on everyone (yearly cap of USD3000, having smaller caps determined by destiny and travel duration), since the destination is a neighboring country with tight relationships and you want to spend a week there, your credit card cap is set at USD700 (if you’re not convinced, you can google “tabla cencoex”/”tabla cadivi” and ask someone fluent in Spanish translate the table’s contents for you), so even if you have a decent credit history and your card has a limit equivalent of USD2000, you’re only allowed to spend 700 just because the government says so.

    But what about cash? That’s another separate permit you must ask for, again requiring the same papers as with the credit card permit (airplane ticket included), yearly the amount of cash you can get from your bank (and which you can only retire after the Central Bank says you’re okay and within the week before you leave) is of USD500, unless you’re planning to go to a nearby country, a case in which you can only request USD200 to carry in your pocket once you get on the plane. It doesn’t matter if your own savings could allow you more, you have to plan all your expenses within the limits imposed on you (and unless you are lucky enough to have family living in your destination, most of it will be gone in the hotel).

    And it doesn’t end there, once you finished travelling and get back, you have to submit a sworn declaration, in which you must tell how much you spent during your travel and even specify how many receipts you got from those, if after a checkup you pass, you might be allowed to submit for another petition to travel again 45 days after you made the declaration, and if you are unlucky, be ready to make a line and take with you all your receipts so you can convince a bureaucrat that you didn’t “steal” from the nation, if you fail to convince said bureaucrat, you can get as much as 15 years in jail (so you better keep all your receipts and papers in line to avoid the crime of… spending too much money?).

    This situation I just described sums up how many obstacles are set on people for something as basic as travelling, it goes without saying that people who don’t own credit cards are by default trapped within this country’s borders and isulated from the rest ofthe world, and new cardholders have to wait a minimum of 6 months after activating their cards to be able to travel. And I haven’t even gone into the details of the USD300 cap for all electronic operations in foreign currency (again, credit card holders only), or how currency exchange houses have disappeared in Venezuela, and outside of Venezuela the only ones that still accept bolivars are located in Colombia, charging at a rate 30 times higher than the lowest official rate set by the government.

    As for the bolivar’s value? When the currency exchange control began it was set at Bs1600 per USD, 12 years after, which included succesive devaluations, a reconversion that substracted 3 zeros from the currency and making a system with 3 official exchange rates, thevalue can either be BsF6.30(Bs.6,300 with the old currency), BsF12.00(Bs.12,000 with the old currency) or BsF52.00(Bs.52,000 with the old currency), so neither the value of people’s earnings and savings nor the Central Bank reserves protected, what happened to the alleged point of starting the currency exchange control in the first place? The only purpose it served effectively was to get industrials to suck up to the government so they would get dollars they needed for International operations, and force into bankrupcy those who didn’t.

    If you want to see how damaging expropriations/confiscations were for the local economy, you might want to look up what happened to Agroisleña when it got turned into Agropatria, or more recently, when Zuli Milk got overtaken this very month and now its installations are disassembled and the stock they had was moved from the Zulia state to Caracas city, just to keep the ilussion over there that people can still find milk (as long as you make the line on the day that matches your national ID’s last number and take no more than one package of powdered milk) all while in the rest of the country people are desperate doing long lines to find something they can buy to feed their families.

    So, what do you find defensible about this economic model? It was all about securing population subservience and limiting what goods they could access to, this model actually made every Venezuelan poorer while misleading everyone through propaganda and the seemingly infinite fountain of oil income to keep appearances, now that oil prices dropped and other OPEC countries refuse to cut their production so they can preserve their market shares, there’s no way to keep the programs that existed solely on the basis of high oil prices nor hide how we no longer produce basic goods that are (or were) part of our diet and some of which we used to export (most pathetic example, we’ve been coffee exporters from as early as the colonial age, and in 2010 the government started to import coffee from Nicaragua and Brazil after is massive failure at expropriating[i.e. taking by force with no compensation to the original owners] and managing coffee companies like Fama de América and Café Madrid).

  18. wendy davis

    Is that you, Antonio Herrera-Vaillant, posing as Juan Bimba?

  19. Ian Welsh

    I approved of his goals, not his means, nor his failure.

  20. ks

    wendy davis,

    Absolutely concern trolling from the NY Times. There are indeed tough times underway but there were reports of shortages long before the recent oil price drop and, as you indicated, it seems a good portion of that was created by the corrupt Caracas/Miami oligarch opposition as part of their never ending campaign (like the street riots last year) to return to rule. Unfortunately, Maduro is nowhere near as skilled a politician nor impactful a cultural figure as Chavez.

  21. Anon

    Ian you’re a damn fool to call the high prices of oil from 2002-2014 with the lul in the 2008-10 period a “resource boom” it was not caused by an increase in supply creating a corresponding increase in consumption, which is what denotes a resource boom as it is classically defined. But rather the shortage of oil and natural gas during that period which lead to higher mean price. Also the drop in price now has less to do with total production and more with OPEC producers flooding markets with their highest yield reserves in an attempt to drive out competition from unconventional or marginal producers, which they believe will ultimately lead to a stable price which they can control. They cannot maintain this for long since within 9 months they are expected to exhaust their immediately available reserves, of course their remaining geologic reserves are vast it takes a great deal of investment to get more production for sale the market.

    Also political pressure from the US government probably has something to do with this, however regional produces in the US have not shut down nor are suffering significant shortfalls in profit due to local demand for specific hydrocarbons, particularly butane from wet gas.

    You’re urbanite desire to see resource and industrial economies fall in preference to service and arts is showing through. You are conflating the collapse of local or regional resource industries due to the exhaustion of their reserves and the downturns due to total product demand.

    In Venezuela’s case the problem is less that the oil price is low and more that their previous primary costumer, the USA, is now producing so much that it no longer imports their specific product, ligher crude of a specific gravity between 0.66 and 0.76. And they have no shipping infrastructure dedicated to reaching another market.

    Venezuela’s problems are far greater than the lost of 25% of their oil revenues anyway, land redistribution never works,ever. And they suffered shortfalls in local food production which was made up for by importation, and once that importation business started it out competed local producers who and previously had a corner on the market and whose increased prices were no longer competitive once the importation infrastructure was in place. And Chavez preferentially funded non-productive urbanites who produced no salable goods. And though the sate oil industry was relatively productive it was less efficient in terms of barrels produced per cost of exploration than the private holders. And don’t even get started on how he fucked up their mining industry.

    The fact that you claim you previously approved some of measures which increased the cost of production in the name of giving more money to the people makes me wonder why you think protectionism can work unless you are a major player. I’m all for mercantilism but you actually have to be a mercantile player before you can effectively engage in it.

  22. Ian Welsh

    Starting with “you’re a damn fool” and then saying a bunch of things which either show you don’t understand my argument or don’t refute my argument is a loser, and an asshole move on top of that.

    To pick out just a couple of “damn fool” things:

    I approve of Chavez trying to redistribute money from a small minority to a larger number of people. That’s the goal (also lighter to darker, Euro descent to Indian descent). I don’t approve of his methods, because they didn’t work. I wrote about his agricultural reforms as far back as 2004 and specifically said why they wouldn’t work.

    Mercantalism works, but like anything else that works, you have to actually execute. It’s not a silver bullet.

    My tolerance for people calling me a damn fool is limited. Be more polite in the future, or I’ll just delete your comments.

  23. wendy davis

    No, KS, Maduro is not a skilled politician, nor is charismatic. And yes, enter Eva Golinger yesterday with:

    ‘Venezuela: a Coup in Real Time: The Same Old Dirty Tactics’

    That a full-court press by corporate media is on is clear; but this defies imagination:

    “Simultaneously, an absurdly sensationalist and misleading headline ran in several U.S. papers, in print and online, linking Venezuela to nuclear weapons and a plan to bomb New York City (“U.S. Scientist Jailed for Trying to Help Venezuela Build Bombs”, Jan. 30, 2015, NPR)”

    Everyone will make of it what they will, of course.

    To Ian: Anon seems to have an agenda past calling you names. Land redistribution worked well in Mexico…until the right-wingers undid the ejido land reforms. Peasants: bad! Farmers: rabble!

    The Zapatistas in Chiapas are doing quite well, and may exhibit the best direct and horizontal I’ve read about.

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