A turnaround in Venezuela?

Juan Guaidó at the State of the Union

Even as Juan Guaidó – recognized by the US and scores of other countries as the legitimate president of Venezuela since shortly after his swearing-in in January of last year – was accepting bipartisan applause during the State of the Union address in early February, back in his homeland dictator Nicolas Maduro was, according to various reports, more secure in his power than he was a year ago.

As Bloomberg News’s Patricia Laya and Alex Vasquez wrote recently, the Venezuelan economy, which for years has been going from bad to worse thanks to Maduro’s “corruption and colossal mismanagement,” has achieved “a certain measure of stability.” Fewer Venezuelans are escaping to Colombia or Argentina or the US, and some are even moving back. How did this happen? In the last few months, Maduro has lifted price controls and has been “allowing dollars to flow freely and private enterprise to flourish.” Yes, dollars:

Nicolas Maduro

Over the past year, the U.S. dollar has become Venezuela’s unofficial currency, appearing in cafeteria menus and mom-and-pop shop windows blocks from the presidential palace. Across the capital, bodegas filled with French Champagne, vacuum-sealed salmon and Grana Padano Italian cheese appeared where bankrupt shops had once been. The bolivar, the official currency, has become worthless through years of hyperinflation.

A Reuters dispatch even described Maduro has having initiated “a broad liberalization” of his country’s economy. The Economist wrote that Maduro had “become a capitalist, sort of.”

One factory owner told the Wall Street Journal, which ran a long article on these developments, that he felt encouraged: “Things were paralyzed. Now there’s cash flow. There’s a possibility to buy material. And that’s positive. We can offer work.” In Caracas, at least, “everything from imported medicines to Iberian hams to auto parts—all once hard to find—now overflows store shelves. And companies large and small, from Venezuela’s biggest private company, food producer Polar, to makers of glue and shoes, have begun to crank up production.”

Hugo Chávez

Still the Journal underscored that Venezuela is hardly out of the woods. Far from it. It’s still “an economic basket case” whose economy has shrunk by 60% since Maduro inherited power upon the death of his mentor, Hugo Chávez, in 2013, and expected to contract a further 10% in 2020. And Venezuela continues to have the world’s highest inflation rate. “Some economists,” moreover, “say the economy’s recovery may be fleeting, since so much of it is import-driven. They note that the government has no macroeconomic stability plan, and none of its changes is codified in law, meaning the government could quickly return to the days of jailing shop owners accused of price gouging.”

In any event, this economic “liberalization” isn’t accompanied by anything resembling a boost in individual liberty and human rights. Free markets? Yes – to an extent, anyway. Freedom of speech, freedom of assembly, and the like? No. As Laya and Vasquez put it, Venezuela seems to be headed toward “a version of Chinese-style state capitalism.” Similarly, the Journal reported that “factory operators, importers and store owners” in the Bolivarian Republic are “anxiously wondering whether Venezuela is moving, ever so slowly, toward a Chinese-like model of authoritarian capitalism—or whether Mr. Maduro is just temporarily giving the market a little freedom while the economy is under severe pressure from U.S. sanctions.”

Miraflores Palace

If Maduro’s Venezuela is really following the Chinese model now, its starving slaves may one day be relatively well-fed slaves. If Maduro is just temporarily opening things up in a cynical attempt to cool things off, he may well clamp down again as soon as he feels he can get away with it. In either case, Venezuela is certainly not on its way to becoming a genuinely free nation. On the contrary, his superficial and perhaps impermanent “reforms” may, as the Journal noted, “reduce dissent” – and lessen the chances that Guaidó will ever be able to move into the Miraflores Palace.

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