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Generational Dynamics Web Log for 29-May-2016
29-May-16 World View -- Hugo Chávez dismantled Venezuela's businesses on purpose to create Socialist Paradise

Web Log - May, 2016

29-May-16 World View -- Hugo Chávez dismantled Venezuela's businesses on purpose to create Socialist Paradise

Economic collapse of Venezuela will devastate the entire Caribbean region

This morning's key headlines from GenerationalDynamics.com

Economic collapse of Venezuela will devastate the entire Caribbean region
Lufthansa suspends flights to Venezuela over non-payment
Hugo Chávez dismantled Venezuela's businesses on purpose to create Socialist Paradise

Economic collapse of Venezuela will devastate the entire Caribbean region

Typical food supermarket in Venezuela

Typical food supermarket in Venezuela

According to a statement by Venezuela's president Nicolás Maduro Moros, his predecessor "[Hugo] Chávez earned a place in heaven" by subsidizing heating oil to 150,000 low-income American families, and especially by the PetroCaribe program, which subsidizes oil for many Caribbean and Central American companies. However, Venezuela's Socialist economy spirals into collapse, all of these subsidy programs are in jeopardy, and ending the programs could seriously destabilize the region, as many countries are already in economic difficulties.

The PetroCaribe program began in 2005, at a time when Venezuela was making huge amounts of money from selling oil. Under the program, a Venezuela lends the country most of the cost of the oil under very lenient terms -- 25 year loans with interest rates as low as 1%. In addition, Venezuela accepts debt payments in kind. For the last 10 years, it has received payments in bananas, rice, jeans, medical assistance and “intelligence” services (from Cuba). Estimates are that this costs Venezuela $2-3 billion per year in lost income. This was not a problem a few years ago, but with the economy collapsing, it is today.

In a recent visit to Jamaica, Maduro insisted that Venezuela is still committed to the PetroCaribe program:

"We are fully convinced that in the last 10 years, PetroCaribe has clearly demonstrated that it’s only together that we can reach development and (achieve) happiness for our peoples."

If Maduro is correct that PetroCaribe is needed to achieve happiness for Latin American peoples, then the logical conclusion is that there will be a lot of unhappiness in Latin America if PetroCaribe ends. That's exactly the conclusion of New York based Latin America analysts LATAM PM.

Venezuela has almost $2 billion in debt due in October, $3 billion in November and almost $4 billion in April 2017, making default almost certain. According to LATAM PM:

Inflation hit 180.9 per cent and the economy contracted 5.7 per cent last year, according to central bank figures. Contagion risks are significant: on one hand, regional risk could spike, with Brazil and Ecuador already in a recession.
PetroCaribe ... is also in big danger. Between 2004 and 2008, Venezuela experienced an economic miracle. Its economy grew ten per cent on average every year, while GDP per capita expanded by 26 per cent. Now Venezuela is going backwards.
By 2018, the country will reach the GDP seen in 2005, but with a population six million (20 per cent larger). GDP per capita will fall to 2000 levels by 2018, as if 18 years had never occurred for the economy."

Members of the PetroCaribe program include Antigua and Barbuda, Bahamas, Belize, Cuba, Dominica, Dominican Republic, Grenada, Guyana, Jamaica, Saint Kitts and Nevis, Saint Lucia, Saint Vincent and the Grenadines, Suriname, Haiti, Nicaragua, Honduras and El Salvador. Guatemala left the program in 2013. From the Caribbean, only the oil producers Trinidad and Tobago and Barbados refused Venezuela’s offer.

The inevitable end of the PetroCaribe program will have significant impact on most of these countries. The region spends around 15% of its GDP on oil imports, and many of the countries have a strong dependency on Venezuela's cheap oil. According to LATAM PM, "the existence of PetroCaribe is a matter of time and this will bring economic instability to Central America and the Caribbean." Jamaica Observer and Nation News (Barbados) and LATAM PM (29-Feb) and Economist (4-Oct-2014)

Lufthansa suspends flights to Venezuela over non-payment

As has been frequently reported, the citizens of Venezuela are suffering one indignity after another, thanks to the approaching collapse of Venezuela's Socialist economy. These indignities include jailing of factory owners, and severe shortages of everything from toilet paper to beer. ( "15-May-16 World View -- Venezuela economy close to collapse as Maduro orders jailing of factory owners")

On Saturday, the German airline Lufthansa announced that it is suspending all flights to Venezuela as of June 18. The reason is that many airline fares are paid in Venezuela's bolivar currency, which has become practically worthless, with the highest inflation rate in the world. Reuters

Hugo Chávez dismantled Venezuela's businesses on purpose to create Socialist Paradise

I was startled to hear analyst Yolanda Valery on the BBC describe the unfolding some of the history of the tenure of Hugo Chávez, as he worked to create his Socialist paradise.

In the mid-2000s decade, Venezuela was swimming in money. Starting in 2006-7, Chávez put a plan into action to turn Venezuela into a pure Socialist state. The plan was as follows:

Dismantle all the private businesses one by one
Use the vast oil wealth to import everything that had previously been produced internally.
Eventually dismantle all private businesses while importing everything.
Finally, the government would own all businesses, and the government would produce everything

Nobody would think of awarding Chávez or any of his acolytes (Sean Penn, Michael Moore, Oliver Stone, Jeremy Corbyn) any prizes for anything but sheer stupidity, but this plan is about the dumbest thing I've ever seen.

This reminds me of Mao Zedong's plan to create a Socialist Paradise in China -- the Great Leap Forward of 1958-59.

500,000,000 peasants were taken out of their individual homes and put into communes, creating a massive human work force. The workers were organized along military lines of companies, battalions, and brigades. Each person's activities were rigidly supervised. Mao's stipulated purpose was to mobilize the entire population to transform China into a socialist powerhouse -- producing both food and industrial goods -- much faster than might otherwise be possible. This would be both a national triumph and an ideological triumph, proving to the world that socialism could triumph over capitalism.

The Great Leap Forward was a disastrous failure, and tens of millions of people died of starvation. BBC: Venezuela on the Brink (MP3 at 17:30)

(Comments: For reader comments, questions and discussion, see the 29-May-16 World View -- Hugo Chávez dismantled Venezuela's businesses on purpose to create Socialist Paradise thread of the Generational Dynamics forum. Comments may be posted anonymously.) (29-May-2016) Permanent Link
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Generational Dynamics Web Log for 29-May-2016 29-May-16 World View -- Hugo Chávez dismantled Venezuela's businesses on purpose to create Socialist Paradise

Economic collapse of Venezuela will devastate the entire Caribbean region

Lufthansa suspends flights to Venezuela over non-payment

Hugo Chávez dismantled Venezuela's businesses on purpose to create Socialist Paradise

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Generational Dynamics Web Log for 29-May-2016
29-May-16 World View -- Hugo Chávez dismantled Venezuela's businesses on purpose to create Socialist Paradise