A Parallel Universe Where FIEM Wasn't Gutted


It’s time to push back against this lazy narrative that puts the entire blame for Venezuela’s economic chaos at the feet of falling oil prices. It’s non-sense.

As Daniel Pratt put it, Venezuela had the institutions it needed to prepare for a fall in oil prices. The main one was called FIEM and it was a Macroeconomic Stabilization Fund designed very specifically to prvent situations like the one we have today, by saving any windfall oil income above the average for the last five years in a rainy-day fund.

Pratt’s post made me think: well what would’ve happened if Chávez had just followed the FIEM rules? How much money would the Venezuelan state be sitting on if it had just left good-enough-alone and followed the rule it inherited?

Image 1 - Spot vs. 5-year Average

Under FIEM rules, the whole blue area above that red line ought to have been set aside for a rainy day. (The brief period in 2009 when the red line was above the blue area was one time when we could’ve made up the shortfall with money from the fund.)

So exactly how much money should be in FIEM, but isn’t? For the answer, you gotta click through to my Guest Post over on BeyondBRICS [free, but registration required.]


  1. I simply love that chart. Oil prices didn’t collapse on the chavistas, but quite the contrary, they saw amazing growth in the oil price throughout the past 15-16 years.

    Imagine you take away the blue bit and just show the red line and call a friend over and say “Dude, I make 96% of my income from selling chocolate cakes, and look at how the price of chocolate cakes has gone in the past 15 years”. Your friend would be getting the champagne ready!

  2. Superb. Although too lazy and innumerate to do the calculations myself, I had a feeling that the missing FIEM money was probably of the same order of magnitude as the pile of cash Marea Socialista (http://6topoderweb.com/2.0/1/2654/investigacin-de-marea-socialista-encontr-fuga-de-usd-259000-millones) calculates was lost to corruption and capital flight due to the barmy exchange system.

    I’ve no idea whether their figure stands up to scrutiny, but one assumes it’s not too far wrong, given that Giordani estimated $20bn or so was stolen in just one year. In other words, it’s even worse than you describe. Because if the government had spent the money on something useful (hospitals, roads, schools) we’d at least have $200bns-worth or so more infrastructure. Instead, most of the money went on private jets, castles in Spain and fancy parties for the oligarchs.

  3. Humans take the lazy narrative over admitting they were responsible for or complicit in an awful, tragic mistake, every time.

  4. The graph is great and robustly explanatory !! two things are missing from the graph , the volume and kind of oil now being produced and sold at regular market prices and the great increase in govt indebtedness!!

  5. Well, of course. I mean, is obvious that the direct cause is the fall of the oil prices. But is also obvious that the reason that is the direct cause is the building of a whole system absolutely dependent on very high oil prices, and one that was not even working well with those.

    The sun may have melted Icarus’s wings, but not following his father advice was the real problem

  6. Toro,

    A technical question: how is Venezuela’s foreign debt calculated? Where did your 108 billion come from? I get different figures every time I try to find out how much is it.

    Same with GDP.

      • To be brutally honest, I think China is the key to everything at this point.

        They view their dealings with Venezuela as an investment in the resources, not in the country nor necessarily the inherent return rate on the disbursed cash. They want to maintain access to the resources.

        Their magnanimity was less about helping Venezuela’s difficult financial position rather than ensuring their oil will be available down the road. Why get something at a 10-15% discount when you can wait and get it for 40-50% and come off looking like nice guys in the process?

        I think when the parliamentary elections come (if they do…), they will float more cash at that time to Chavismo, Inc. They know that Maduro can survive until that point through creative financing that we have been seeing, or through adjustments, (which will probably never happen). I believe they will support the regime if it looks like Maduro might lose and an opposition AN takes over which could lead to all sorts of questions about the legality of the Chinese loans, business ventures, bids on fields, etc. If it jeopardizes the investment and Maduro (or Delcy *sigh*) indicates that the Chinese may lose everything, they’ll back Maduro as they did Chavez. Given the Chinese are currently in the position to hear only a single side of the Venezuela story, well…guess how that will turn out.

        Someone from the opposition should be approaching the Chinese and assuring them that they will have at least some protection. The Chinese may not back the opposition, but denying Maduro, Cabello and the others the Chinese and their deep pockets would go a long, long way to throwing a monkey wrench into the coming election cycle.

        Just my two bolos on the Chinese.

  7. Not to state the obvious, but in that universe, Chavez did not get reelected because he didn’t have enough cash to buy his supporters affections and loyalty, thus never arriving at this point of economic disaster.

    • In that universe, the wax doll would have paid the full punishment for his coup, sitting in Yare during 30 years like the law dictated, along with all his cronies.

  8. BTW Quico, imagine that was in the FIEM, the Bolivar would be at 2.5-3 per $ and we would all be bitching that everything is so expensive in Venezuela

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