CubaBrief: Chavez, Maduro, and the pernicious role of Castro’s Cuba in Venezuela

The New York Review of Books,  March 8, 2018 issue

Hell of a Fiesta

By Enrique Krauze

In the spring of 2017, and all through the year, social media feeds in Venezuela were filled with images of deprivation and despair: long lines of people hoping to purchase food; women fighting over a stick of butter; mothers who could not find milk to buy; children picking through garbage in search of something to eat; empty shelves in pharmacies and stores; hospitals without stretchers, drugs, or minimum levels of hygiene; doctors operating on a patient by the light of a cell phone; women giving birth outside of hospitals. Venezuela’s economy, the economist Ricardo Hausmann wrote in a recent study, is suffering a collapse that is “unprecedented” in the Western world.1Between 2013 and 2017 the country’s national and per capita GDPs contracted more severely than those of the US did during the Great Depression and more than those of Russia, Cuba, and Albania did after the fall of communism.

This is a humanitarian crisis of immense proportions. By May 2017, Venezuela’s minimum monthly wage wasn’t enough to meet even 12 percent of a single person’s basic food needs.2 A survey of 6,500 households by three prestigious universities showed that 74 percent of the population had lost on average nineteen pounds in 2016. Infant mortality in hospitals has risen by 100 percent. Diseases nearly eradicated in many countries, like malaria and diphtheria, have flourished; illnesses largely new to the area, like Chikungunya, Zika, and dengue, have spread. Caracas is now the most dangerous city on the planet. All this is happening in a country that has one of the largest oil reserves in the world.

None of the present crises seemed likely in 2007 and 2008, when I made a number of visits to Venezuela. Caracas was seen as the new Mecca for the European, Latin American, and American left. Progressive news organizations, magazines, and newspapers includingThe GuardianThe New Yorker, and the BBC reported favorably on Hugo Chávez, whose presidency lasted from 1999 until 2013. They mentioned the dangers of his cult of personality but yielded to it all the same. Chávez, as the writer Alma Guillermoprieto succinctly noted in these pages, was “indisputably fascinating, and often even endearing.”3

Despite ever-growing limitations on freedom of expression and the canceling of the license of RCTV (the principal independent radio and television service), some analysts, including the British writer Tariq Ali, kept proclaiming that Venezuela was the most democratic country in Latin America. Since they were indulgent of Cuba, they didn’t mind that Venezuela was drifting toward the authoritarian Cuban model. They rightly celebrated Chávez’s successes at reducing poverty, but they failed to see the damage his administration was meanwhile inflicting on the country’s entire productive infrastructure—most consequentially, on Venezuela’s state-owned petroleum company, Petróleos de Venezuela (PDVSA).

In 1998, as the development specialists Ramón Espinasa and Carlos Sucre note in their recent study of the Venezuelan oil industry,4 PDVSA employed 40,000 people and produced 3.4 million barrels of oil per day. By the first decade of the twenty-first century, it projected it would be producing 4.4 million barrels per day. It operated autonomously and by law deposited its profits in the country’s Central Bank. With Chávez’s election, all this changed. He ordered that PDVSA personnel be hired for their political credentials rather than their technical skills, and that oil be sold at highly discounted prices to Latin American countries sympathetic to his administration.

In December 2002, the employees of PDVSA went on strike. The government responded by stripping the company of its administrative autonomy, nullifying the exchange agreement that required PDVSA to sell all foreign currency resulting from the sale of oil to the Central Bank, and handling those resources discretionally itself, outside the budget approved by the Venezuelan National Assembly. Roughly 20,000 employees were dismissed, two thirds of them with technical and professional skills. In the years that followed, PDVSA became a super-ministry; it distributed food, built houses, and managed some of the 1,400 businesses that Chávez frenetically nationalized starting in 2007. During Chávez’s presidency, it came to employ three times as many people as it had before 1998. Its productivity, on the other hand, fell significantly; it produced 700,000 fewer barrels per day. This reduction was masked in part by the surge in oil prices that began in 2002 and peaked in 2008 at $147 per barrel.

Critics of Chávez—former guerrillas, opposition leaders, left-wing intellectuals, labor and religious leaders, artists, businessmen, students, academics, and former military officers—foresaw what was coming. One of those voices was Espinasa, who told me in 2008 that “the prices will fall; the government will not be able to halt its expenditures and production will not recover; the collapse is inevitable; the perfect storm is coming.” But oil revenues remained high for four years, and Chávez used these revenues to spend more than ever. Each year he left a public-sector deficit of around 10 percent of the GDP. Between 2014 and 2015—by which point oil prices had collapsed, Chávez had died, and Nicolás Maduro had succeeded him as president—those deficits reached 20 percent of the GDP.

Read the full article here: