Venezuela February 2019

There is a lot of talk about Venezuela currently with people making many erroneous claims. This is meant to be a relatively in depth study of Venezuela's economy, political structure, and history.

History

Pre-History

Venezuela has been inhabited by people for thousands of years.

Colonialization

Venezuela was conquered by the Spaniards in the 16th century, like most of the Americas.

Independence and Gran Colombia (1812-1827)

Venezuela was part of the Bolivarian Republic.

Early Independent Venezuela (1827-1948)

Venezuela had a democracy for most of its early history.

Military Dictatorship (1948-1958)

Venezuela was ruled by a military dictatorship for 10 years.

Republic of Venezuela (1953-1999)

The Republic of Venezuela saw a regular transition between the Democratic Action and Copei Parties. Economically it was a petrostate, but it maintained democratic traditions during these 46 years. The last President was Rafael Caldera who saw steady economic growth and invested in education and infrastructure during his Presidency. He opened the oil industry to foreign companies, and this helped economic growth.

Hugo Chavez and Nicolas Maduro (1999-2019)

Hugo Chavez won the Presidency in December 1998. during his presidency the economy boomed during his time in office, mostly as the result of soaring oil prices. His response to this good fortune was to nationalize multiple industries, financed by the rents on exporting oil during the high oil prices of the 2000s.
Due to this circumstantial good fortune of being the leader of a country sitting on massive oil reserves in an era where oil prices only went up with an exception of the Great Recession, he was able to maintain popularity as people had everything they needed. Chavez died on 5 March 2013, leaving Maduro as President. The first year was smooth for Maduro, as the price of oil continued to hover around 100 USD per barrel. This good fortune ended in June 2014, by January 2016 the price hit a trough of $35 per barrel. This was to no fault of Maduro by himself. However, the consequences of a highly centralized economy, with being the third lowest score in the Ease of Doing Business in the world, has prevented their economy from being flexible to a rapidly changing situation. the oil rents which funded the services provided by the Venezuelan government gone, Maduro was faced with a choice, he could either liberalize the economy and allow the invisible hand to allocate resources, or he could clamp down on an economy with massive shortages and literal famine as a result of his policies. this has been documented in a 400 page report by the Organization of American States which is viewable here, and worth reading. In short, they have called on Nicolas Maduro to be charged by the ICC for crimes against humanity which the document outlines, which is highly unusual.

I do not care if a dictator calls himself socialist or fascist. I just care that Nicolas Maduro has violated the human rights of his people, which is always inexcusable. Venezuela has the largest refugee crisis from a non-war zone since the partition of India. It is the 6th or 7th largest refugee crisis in recorded history. The lack of food and economic devastation over the last couple of years has devastated the Venezuelan economy.

Economics

Venezuela sits on the largest proven oil reserves in the world. The government has used the rents from exporting oil to finance projects, particularly under the Chavez regime.

Venezuela has seen significant economic collapse over the last few years, with two years in a row with a -14% GDP growth rate, and a poverty rate which has skyrocketed from 19.7% in 2015 to 87% in 2017. Inflation has soared to over 2 million percent this year. A significant reduction in GDP and a significant increase in prices is massive stagflation, a significant shrinking of supply over a short period of time. With government corporations no longer getting the oil rents they were funded with, this should surprise no one.

They say to never put all your eggs in one basket, and Venezuela gives an incredible example of why this is true, for that is exactly what Chavez did.

References

• Price of Oil
• Venezuela economic statistics
• Largest refugee crises
• Wikipedia

Venezuela-American relations

America's relationship with Venezuela is... complicated. Venezuela currently holds the largest depository of proven oil in the world, and their government doesn't want our oil companies taking their oil, but want to use it for their own national development. This causes tensions, as America's politicians who routinely receive large donations (read bribes) from the oil companies that want to tap the largest proven oil reserve in the world. Venezuela is in a unique position that their late leader Hugo Chavez was a populist, with the goal of protecting Venezuela's natural resources for Venezuelan companies. This caused massive tensions between the government of the United States and Venezuela. Since President Theodore Roosevelt, the United States has mostly pursued an expansionist foreign policy not of military ends, but of economic. When we controlled Cuba under their pre-Castro dictators (let me be clear I am no fan of Castro, he was a dictator by any measure) we had access to large plats of land that we farmed, and controlled our economic interest mostly through military means. Venezuela and the United States have a similar interest in one another, and from the discovery of oil in 1908, which developed strong relations between Venezuela and American oil companies (represented by our government) which for 90 years was a very important source of revenue for our government. In 1943 they set up a 50/50 split with American oil companies which gave immense wealth to both American oil companies and the Venezuelan government.

2001 was a crucial year for the disintegration of Venezuelan-American relations because President Chavez declared all oil in Venezuela property of the state, as in not property of American companies. This means that the American companies that formerly owned and operated oil in Venezuela can't anymore. Oil companies have immense influence in several important ways, first of all they regular give campaign donations to our elected and appointed government officials. (which is often referred to as lobbying, which I personally refer to as bribery) President Bush of course made his fortune in the oil industry, which means that his company and the companies fellow oilmen in his cabinet lead/led (Condoleeza Rice was on the executive board for Chevron, among other high-profile connections) lost billions of dollars in assets in Venezuela with the Venezuelans seeking control over their own economy. This is what turned our relations sour. The second way that oil companies greatly influence our country is through popular perception, and I would bet that they have connections at some level. Corporate America is a very complicated mixture of companies and looking at who is on the boards of directors of different companies I find a lot of people will be on different boards. I didn't find any clear connection between the large companies that own American media (which are News Corporation, Disney, Comcast, and National Amusements) but I did find many connections between them and people on the boards of large financial institutions. Here the skeptical investigator reaches a question... is this enough evidence to become convinced there is a clear conflict of interest between the four large channels and reporting on Venezuela given its complicated connections to the oil industry? Oil is one of the most profitable industries in the world, and if a bank wanted a great industry to make a killing in, a large market would be oil. Looking at the list of people who are on the boards of directors of companies that are available, it is easy to see that many people who lead these massive companies are members of multiple boards, and many investment banks are represented. Looking at large corporations, here is a very small sample of the fortunes of oil in Fortune 500 companies:

1. Berkshire Hathaway has an interest in cheap oil through their subsidiary Lubrizol
2. Chase bank played a big role in financing Enron
3. One needs to look no further than the list of major holders of Exxon Mobil where one can see a number of large banking institutions.

With all of this evidence, it is hard to not be convinced that there is a major conflict of interest between the major news broadcasters regardless of their political alignment and their desire for the largest proven oil reserve in the world... It is quite damning in my opinion. This is enough information for me to conclude that there is enough evidence showing a clear conflict of interest in the foreign reporting of all major corporate American broadcasters.

No wonder American-Venezuelan relations are so poor.