El Gran Viraje, 25 years on

Twenty-five years ago today, Venezuela’s recently inaugurated president gave a speech.

It is safe to say that few speeches have been as momentuous or significant as the one Carlos Andrés Pérez gave that day. In it, Pérez announced his government’s economic plan. It marked Venezuela’s first attempt to liberalize a severely distorted, and simultaneously bankrupt economy. The set of measures included freeing the prices of public services, raising the subsidized price of gasoline, letting the market set the rate at which the dollar would sell, and lowering tariffs – your basic Washington Consensus recipe.

It was a whopper, a true paquetazo. Eleven days later, the Venezuelan public would give their verdict, and Venezuela would never again be the same.

I was a starting my economics studies at the time, and I wasn’t fully aware of the depth and braveness of the reforms Pérez was attempting. As the months went by and I studied my profession in more detail, we all realized what he was doing was unprecedented. For the first time ever, Venezuela was trying its hand at capitalism. It was also failing at it.

Still, the experiment marked me, along with a generation of economists and other students. For a brief moment in time, we thought this could be a country where, yes, we could argue about free trade agreements and about the right way to privatize money-wasting state companies. A country where we could discuss whether or not the newly-independent Central Bank should intervene in the currency market, or whether supply and demand should take care of the price of the dollar on their own. A country where we could think of ways of making the stock market bigger, not smaller, and where we could analyze ways to implement social policy in a targeted manner.

For my generation, Miguel, Ricardo, Moisés, Imelda, and the others became an inspiration, and for that I owe them a load of gratitude. But all that’s in the past now.

Yes, many mistakes were made, and the timing of the policy implementation was off. More emphasis should have been given to social policy.

In spite of that, twenty years of poor economic performance have proven Pérez right. We should not be ashamed to admit that the revolutionary Gran Viraje was, in a broad sense, the right way to go.

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