CIPR | Center For Inter-American Policy & Research

Tulane University

David Smilde speaks to PRI about Venezuela's economic crisis

Listen to PRI’s The World speak with Tulane University professor David Smilde who lives in Caracas, where he also works with the Washington Office on Latin America, an NGO. Smilde believes the immediate cause of the current crisis in Venezuela is the decline in oil prices. But he says at least 10 years of economic mismanagement are to blame, too.

July 06, 2016
By Daniel Ofman

Not too long ago Venezuela was an oil-rich nation, with a seemingly bright future filled with economic prospects and great potential for growth.

Now Venezuela has an 180 percent inflation rate — and there are shortages of food, basic goods and power.

Tulane University professor David Smilde lives in Caracas, where he also works with the Washington Office on Latin America, an NGO. He believes the immediate cause of the current crisis in Venezuela is the decline in oil prices. But he says at least 10 years of economic mismanagement are to blame, too.

“Nicolas Maduro inherited a set of policies from Hugo Chávez that were created during the good times. These were policies that were completely unsustainable, they were based on continual growth of income from oil,” Smilde said.

According to Smilde, when oil prices were high in the early 2000s the national revenue was mismanaged through the so-called “Bolivarian missions,” a series of government-funded social programs which Chávez started and Maduro has continued.

The Bolivarian missions included anti-poverty initiatives, the construction of free medical clinics, educational campaigns, and the enactment of food and housing subsidies. Critics have called these initiatives irresponsible handouts that didn’t account for potential recessions.

“Now oil revenues have dropped and Venezuela has very little productive capacity, so it can’t produce its own food really and it doesn’t have enough money to import what it needs,” Smilde said.

Venezuela is also suffering because it lacks economic diversity. During the years when oil prices were high, the country relied on oil revenues and imported most of its food. Declining oil prices took down the nation’s economy as a whole.

Venezuela has also accumulated large debt, which is making it even more difficult for the country to climb out of the current crisis.

So far the government has been “making sure to pay its foreign creditors but it has really been reducing the number of dollars that are assigned to importing food and other basic goods. People are really suffering,” Smilde said.

People are standing in lines for hours just to buy food at the grocery store. Others go to the streets and protest, carrying signs demanding food. “Bachaqueros,” nicknamed for carpenter ants which carry big loads on their backs, sell black-market goods to fill the void and turn a profit.

They may be making the crisis more tolerable, but the government doesn’t approve of them.

“The government sees this as sabotage,” Smilde said, “sees these people as traitors and so it has tried to clamp down on this bachaquerismo.”

Instead the Venezuelan government has promoted committees on local production and supply that are charged with taking bags of food directly to people. However, the system is incredibly inefficient.

“The real problem is that there’s just not enough food,” Smilde said. “It’s not a distribution problem, it’s a production problem.”

And Smilde says the committees makes supermarket lines worse by pulling merchandise from their shelves. Looting is becoming an increasing threat. Since May there have been an average of 10 lootings a day.

Smilde is fortunate to be able to visit the United States frequently, where he can pack suitcases full of goods to live on. Most Venezuelans do not have that luxury.

“My heart really goes out to them and it’s one of the reasons that keeps me working on this issue,” Smilde said. “There’s not a night that I don’t think about this: ‘What’s going to happen in the next six months?’ Because things are really ugly right now, but they can get significantly worse.”

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Latin America at the Crossroads: Peru

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Join CIPR for the third talk in the “Latin America at the Crossroads” series, this talk focuses on Peru. Voters rejected Keiko Fujimori, daughter of former President Alberto Fujimori, for president in the April 10, 2016 elections, but gave her party a majority in Congress. The election was marked by controversy and demonstrations, with many concerned that a win for Fujimori would mark a return to the human rights violations and corruption of the elder Fujimori’s presidency.

Dr. Cynthia McClintock, Professor of Political Science and International Afairs at George Washington University, will present on these recent events. Dr. McClintock is author of Peasant Cooperatives and Political Change in Peru (Princeton University Press, 1981) and Revolutionary Movements in Latin America: El Salvador’s FMLN and Peru’s Shining Path (U.S. Institute of Peace, 1998) and the co-author of The United States and Peru: Cooperation at a Cost (Routledge, 2003). A past President of the Latin American Studies Association, she has taught at the Catholic University in Peru, appeared on major U.S. and Peruvian news programs, and testified before the Subcommittee on Western Hemisphere Afairs of the U.S. House of Representatives.

The talk is free and open to the public but RSVP is required.

For more information and to reserve your seat, please contact Sefira Fialkof at cipr@tulane.edu or phone 504.862.3141.