Tuesday, November 1, 2016

How Venezuela Imploded

View from National People's Radio errrr, I mean NPR.  I'm sure these people won't mention its renege on the deal when oil went to $140/bbl.

They instead blame it for "not saving the money!" in typical moron fashion.

You can't renege.  Now it is circling the toilet bowl.

Venezuela used to be a relatively rich country. It has just about all the economic advantages a country could ask for: beautiful beaches and mountains ready for tourism, fertile land good for farming, an educated population, and oil, lots and lots of oil. 
During the boom years, the Venezuelan government made some choices that add up to an economic time bomb. Venezuela didn't save its oil money. It used it to subsidize goods and services for the people, but in some unusual ways. Another choice: instead of making stuff at home, Venezuela imported almost everything it could. The government also kept tight control on the exchange rate between Venezuelan bolivars and U.S. dollars.


Bob said...

They should have developed that fertile land, or introduced land reforms. Live and learn.

Andrew Anderson said...

Venezuela didn't save its oil money.

To the extent vital imports are needed, one should have foreign exchange reserves since one can't print those and the drop in oil price proves one cannot always count on earning more either.

Of course, one should have a well developed domestic economy so imports aren't so needed.