Published On: Mon, Dec 8th, 2014

Shadows over Venezuela

dekker_0Venezuela’s official exchange rate, US $ 1= 6.30 BF. The free market rate is US $ 1= 174.03 BF, nearly thirty times the official rate.

Venezuela has to import 70% of all its consumption products and pay in foreign currency, preferably US dollars; therefore it urgently needs an income stream of foreign currency, of US dollars. Oil-export is Venezuela’s nearly only major export product and hard currency revenue stream. With the dramatic price drop in world oil markets, Venezuela’s dollar income will also suffer with a decrease of 20-30%. That shrinkage comes on top of an already ailing economy.

The lack of dollars will put even greater pressure on availability of imported consumables in the country, and increase shortages, such as many already experienced over the last year. People lined up for hours daily, to collect their state controlled rations.

Venezuela’s government will have increasing additional cash flow problems, especially meeting its international loan agreements, like interest and principle payments to China. Projections show that Venezuela will become insolvent by next April. The economic and monetary crisis could lead to the political end of the present Maduro-government and its Bolivarian revolution that has dominated the country’s economy over the last 15 years.

Venezuelans reacted massively with emigration to Canada and the USA. Also thousands moved to the streets for massive daily demonstrations. But more than anything else, millions joined the rapid expansion of Venezuela’s shadow economy in spite of the high risks.

Exchange rate rackets with insiders’ access to cheap “Sicad-“ and “Cenco”- dollars, sprang up everywhere. Thousands made fast turn -around excursions to the Antilles islands and neighbor countries to raid ATM-machines. Others started contraband shipments of cheap, subsidized gasoline across country borders.

The most lucrative of all activities of the shadow economy was trafficking Bolivian, Peruvian and Colombian cocaine. International Law Enforcement estimates that at least 60% of the entire South American cocaine -production flows through Venezuela before it reaches the EU and the USA.

Today, the high risk side of Venezuela’s exploding shadow economy is best portrayed by its murder rate. The government published official rate of 53.7 per 100.000 inhabitants may be one of the world’s highest, but it is only half of what reality is estimated to be. In 2013, more than 24,000 killings were reported. Venezuela’s economy has become a complete Wild West of murderous competition, a country of “ struggle for life and survival of the fittest. ”

The fittest have guns and will shoot to kill. The violence is already spilling over to all surrounding countries and the entire Caribbean basin. In the meantime, the Maduro government continues to demonstrate its inability to manage change in its own country, and in its oil and financial markets. It is clinging to dogmatism of Marxist-Stalinist Cuban communism. The crisis puts the very survival of the political system at risk.

Charles Darwin put it so succinctly, “ It is not the strongest or the most intelligent who will survive but those who can best manage change.”

By Jacob Gelt Dekker - Columnist for Curaçao Chronicle

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