Everybody knows that Venezuela is and will always be a Petrostate. It’s our destiny: the road to development consists of aggressive exploitation of our oil resources. In fact, why even bother with anything else? Cuando uno tiene esta cantidad de petróleo, mejor te especializas en tu ventaja comparativa. Right?

What are we talking about, when we’re talking about oil riches?

Let’s look at some numbers: Assuming oil prices and domestic consumption remain steady, the herculean task of bringing oil production up to 6MM bpd by 2022 would take us back to per capita oil export revenues nearing $2,300. That’s close to the values observed in 2013, the year that we officially ran out of toilet paper. It’s just slightly above the 1983 figure, the year of the infamous Viernes Negro.

export revenues p_dSources: BP, BCV, MPPPM, WB and own calculations. Note: 2016-2022 values are projected.

Let’s frame this differently – Meeting our most ambitious goals for the oil sector and doing nothing about non-traditional exports would take our per capita export revenues by 2022 to about:

  •      Half our historic maximum from almost 50 years earlier.
  •      Less than half of Trinidad and Tobago’s exports per capita from 10 years earlier.
  •      Less than a fifth of OECD’s exports per capita from 10 years earlier.

Moreover, in order to get us to about half of OECD’s 2013 exports per capita -roughly the exports per capita of Trinidad that year- the Venezuelan oil basket would need to crawl back up to $115 (WTI / Brent above $125) per barrel, or production would need to go up to 14MM barrels per day. Today, these are part of no one’s scenario.

Rich OilSo, are we rich because we have oil?

No, we are not, and we wouldn’t be if we effectively went on to meet our most ambitious goals for the sector. The idea that Venezuela, a country with over 30MM people, could be as rich as the Arab oil producers -or even Trinidad- if we just managed the oil sector adequately is a myth. El petroleo le quedó chiquito al país.

This is not to say that oil is not fundamental for what’s to come, or that the discussion on how to reach our goals for the sector is unwarranted. By all means, Venezuela must meet its God-given potential in the oil sector, and all the “oil-nerdistry” we can muster is necessary in envisioning a strategy that can take us there. Achieving our goals would probably require an ambitious Apertura Petrolera: a thorough revision of the fiscal and regulatory frameworks to allow for vast private investments under a risky landscape and macro-projects that imply costly production structures for relatively less valuable output (i.e. Faja). This is a stimulating policy challenge that will require the thoughtful design and untiring implementation that only the Petroleros can bring to the table.

But from an economic development perspective, the Petrocéntrico mindset that productive diversification should not be a policy goal is both wrong and dangerous. Sadly, that is the core message I took away from Amanda’s Uslar-bashing extravaganza some weeks ago.

I don’t have much love for Uslar, as he ultimately used all his prestige and legitimacy to undermine the modernization agenda of the 90s. But for all his flaws, challenging the country to avoid comfort in easy money and inviting us to find productive uses for it was not one of them. Uslar’s vision of oil being both a temporary and uncontrollable source of revenues gets at an essential truth about oil markets even today.

While we now know that we have infinite amounts of oil for any practical purposes, oil remains a temporary source of revenues: We may not know oil’s exact technological expiration date, but are we really sure it’s far beyond 2040? Moreover, Venezuelans should be experts about the perils of “external factors and decisions” in determining oil revenues –especially today, when a drastic technological shift and the decisions of middle-eastern kings have such damaging effects on our everyday lives.

Moving beyond Uslar, I fear for the narrative behind Amanda’s piece to stick, as “Sembrar el Petróleo” stuck. She’s not shy about it: “If you’re born rich…”, “rich people problems…”, “stop daydreaming about fostering tradable-goods”, “bizarrely (the Dutch Disease) is considered a problem”. The underlying message is pretty clear: “Somos ricos porque tenemos petróleo, lo que hay que hacer es sacarlo”.

Lacking the money or prospects of the 70’s, this Venezuela Saudita illusion is sadly making a comeback in some circles: I try to teach at UCAB’s School of Economics every time I’m in Caracas. More and more, I find it a common place for the small group of policy-oriented kids to say “Hey, let’s just get the oil side straight, and just let the market take care of the rest”. This scary convergence in their thinking may be caused by misidentifying the factors behind the mismanagement of oil rents in Venezuela.

On incentives and false dichotomies

Clearly, things have not gone right for Venezuela, and clearly something has to change if we are to expect different results. But what’s the fundamental change that needs to occur if we want to enter an economic development path?

In broad strokes, the Petrocéntrico train of thought sees the major economic flaws in our democratic history as due to the excesses of different governments who, enabled for misallocation by the lingering narrative of “Sembrar el Petróleo”, always found ways to funnel funds towards erratic policy goals that ended in inefficiency, mismanagement and graft.

A different view is that incentives to use oil moneys for political purposes would have still prevailed in the absence of such a narrative. The institutional origins of oil mismanagement lay on what Luis Pedro and Pedro Luis Rodriguez have defined as discretional rentism, which I have also called oil opportunism: when the incumbent has the capacity to manage large oil rents at will, the stakes in power are so great that they break incentives for societal cooperation around shared long-term development goals. To the contrary, the discretional management of oil rents leads to voracity and political opportunism, undermining policy making and polarizing the political dialogue.

In that front, some of Amanda’s policy suggestions are on point in aiming at reducing the discretional capacity for the government to manage oil rents and other decisions. While it’s difficult to think of a government that would organically decide to tie its hands and rescind power, it is precisely in a situation of crisis with constitutional ramifications -such as today’s- that the renegotiation of the social contract in this direction becomes possible.

For instance, in a constitutional event, we could decide to follow the Rodriguez’s proposal for the “Fondo Patrimonial de los Venezolanos”. Or we could just transfer rents and then tax back for whatever policy purposes are deemed justified. Alternatively, we could earmark the policy uses of oil rents. Or we could think of something like Alaska’s Savings Fund on top of a stabilization mechanism. All of these should probably be discussed as mid-term goals in the context of the severe fiscal and external deficits that need to be addressed as a short term prerequisite.

There are many things that could be done to address oil opportunism, but… that says nothing about whether diversification should be a policy goal or not. If we don’t argue against public interventions in health and education because of past mismanagement, the same should go for productive development policies. Everything that’s blamed on “Sembrar el Petróleo” is nothing but the consequence an institutional breakdown that would have still been there had Uslar never been born.

Productive development as a policy goal for Venezuela

The development of the oil sector is a fundamental building block for a long-term economic development strategy, but it cannot become the economic development strategy. Oil can only take us so far, and it worries me that no one is discussing the need to increase productivity and diversify. Venezuelans should be thinking about smart productive development policies as intensely as they are thinking about it in Mexico, Colombia, Peru, Chile, Brazil and –even more telling for Venezuela- Saudi Arabia.

Beyond the need to export so much more than what’s feasible through oil specialization, diversification leads to a more robust and stable process of economic growth, it allows for expanded sources of domestic high-quality jobs and it leads to strong innovation spillovers. Sadly, there’s no nerdistry talking about the private sector development strategy of the next government, or discussing how a new government might institutionalize the management of oil rents to avoid them from hampering macro stability and competitiveness of other economic sectors.

I see no nerdistry on how to promote investments in pioneering sectors in Venezuela, or how to promote a venture capital, angel investment, and incubator and accelerator ecosystem in Venezuela. No one is discussing the institutional design of intelligent and modern industrial policies that overcome the failures of the old Latin American approach. There are no conversations about what the actual role of the Ministry of Higher Education, Science and Technology and the Ministry of Planning should be in tackling coordination failures that prevent innovative business initiatives and in building the groundwork for a competitive Venezuela in an increasingly knowledge-intensive world economy.

All current discussions are about stabilization macroeconomics and oil. Those are obviously urgent and fundamental tasks. But ignoring microeconomic development is to sin by omission.

We can create an Agencia Nacional de Hidrocarburos AND an Agencia Nacional de Desarrollo Productivo, both with the same degrees of institutional independence, accountability and clarity of mandates. BANDES could become something similar to BNDES in Brazil, NAFIN in Mexico, CORFO in Chile or BANCOLDEX in Colombia. Not all of the projects these institutions fund are successful, as the process of productive self-discovery is, by nature, experimental. But through a complex set of policies, they are helping push forward the process of creative destruction in non-extractive sectors of our extractive economies.

The process of productive self-discovery is not about finding “the substitute for oil”, or a “new oil sector”.

If there is one critique on Uslar’s “Sembrar el Petróleo” I share is its unwarranted physiocratic bias. Why should we prioritize topocho sowing over medicine production? No one can really say ex-ante what a society can be internationally competitive in –and although the current productive or export structure of a society can provide some hints, our focus on oil suggests limited spillover possibilities. Beyond setting all hopes in a single sector, this view suggests that broad experimentation is at the heart of local innovation, productive development and economic growth.

So let’s start a conversation about how to build an ecosystem where risk-taking and pioneering entrepreneurship is encouraged, where productivity is rewarded, where the role of the private sector as the engine of wealth creation is valued, and where its constraints on higher productivity are heard, understood and addressed.

Make no mistake – private sector development is directly undermined by the view that we are rich because we have oil. Actually, the battered stance of private enterprise and liberal values in Venezuela is a direct consequence of the Petrocéntrico narrative. If we are rich because we have oil, then why do we need a private sector? The government does not need to collect taxes, and people do not need jobs. All focus is set around the distribution of rents, not around the creation of wealth. If Rentismo was the Zika virus, the thought that oil makes us rich is the puddle where mosquitos grow.

We can’t just keep staring at our bellybuttons. We should build a system that promotes long-term cooperation around shared national goals, by eliminating opportunities for discretional use of oil rents. In that process, we need to agree on how to stabilize our macroeconomic accounts, we need to agree on how to meet the potential that we have found in the oil sector… and we need to agree on a policy and institutional framework to find out our potential in other economic activities. That’s the adaptive challenge for our generation if we want to leave our children with a country on the path to becoming rich.

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I work in development economics for countries with governments that want to deal with (some of) their issues. I think I'm a fiscally-responsible progressive. I've thought a bit about the Political Economy of oil in Venezuela, and I worry about the politics of the things that need to happen. I think Rómulo Betancourt, Adolfo Suárez and George Washington were exemplary politicians. What I miss the most about Venezuela: My family, my friends, my weather, my food, my band, and teaching in my university.

48 COMMENTS

  1. Has anyone in Venezuela ever looked to Norway for how the handle huge amounts of oil money without totally wrecking the economy?

    • I don’t believe in cookie-cutter solutions. Although a look at Norway is definitely informative, the differences between the two countries are far too great… culturally, geographically, etc.

      Our capital city is more populous than your entire nation by a couple of millions…

  2. First step is don’t destroy your democracy and your market economy that produces what the consumer needs because of some outdated, stupid ideology that never worked right anyway (i.e. don’t imitate Fidel Castro). Second is don’t put thieves into power who steal all the oil wealth.and who play you for fools.

  3. Bravo. Very interesting and thought-provoking.

    Perhaps what oil should be sembrando are (at least) some top-of-the-line research facilities so that private enterprise entrepreneurs will have a pool of background data about potential future products for export.

    Whether miracle drugs or miracle avocados, those future products will require years of primary research before they become viable. Venezuelans may not have the deep pockets necessary. That sounds like a worthwhile role for oil from now until 2040.

  4. Hoping for an uptick in the price of oil has become the primary economic plan for the Bolivarian Revolution. That’s it. Stand an watch. The thought here being that the price of oil should be going up shortly. The entire economy is imploding, yet the Chavista’s expect everything to turn back to ‘normal’ once the price of oil goes over, say, 65 dollars a barrel. That’s the plan. Nothing more. This is complete insanity. Frightening.

  5. 1. whatever impulse is given to greater economic diversification for a few decades at least oil represents the best opportunity for economic growth .
    2. we must expect however that because of structural changes in the composition of our oil resources and international markets , we will need a much better management and use of investments to achieve lower yields both in production and money . Margins will fall while remaining still interesting. (look at how coal has survived all these years , making up for lower income with greater productivity)
    3. the current Pdvsa is incapable of doing the job that it needs to do to keep oil flowing and maximizing income from its marketing , thus the need for the best optimal international oil partners to take up much of that job while keeping a calculated Pdvsa shareholding presence , with a commitment to create organizations which incorporate local talent and learn the methods and corporate practices of the international companies. Back to 1950 ….
    4. Change in legal frameworl for greater flexibility in structuring of investments and operations ….
    5. Creation of an institutional system for the handling of resources by state agencies in a professional technocratic mode protected from partisan political interference . Systems for selection and advancement of personnel merit based and monitored and handled by professional organization vetted by international technocratic institutions…….

  6. “Everybody knows that Venezuela is and will always be a Petrostate.”

    Interesting post, but the above premise is flat-out incorrect.

    [post truncated until you learn to read. -ed]

    • Jesus Christ I have no patience for this crap.

      If you don’t intend to read the post before pontificating, why bother?

      • Cool, you didn’t read the rest of my post, did you.. where I agreed with Juan.. This reminds me of Venezuela’s dictatorship, censorship and lack of free speech on this blog. If you don’t like something, you just delete it. great. Post this if you have a pair.

  7. As long as Venezuela’s political class insists on the communist structure of cancerous over-centralization and monopoly of all the economic resources in the country, yes, the country will be doomed to depend on the oil exports.

  8. “I see no nerdistry on how to promote investments in pioneering sectors in Venezuela, or how to promote a venture capital, angel investment, and incubator and accelerator ecosystem in Venezuela.”

    Clearly you haven’t tried to see it.

    Initiatives such as The Impact Hub Caracas, Wayra and Bloxie School -just to name some- are laying the foundations for massive entrepreneurship development as soon as the country gets back on track… And they’re doing it great!

    Not acknowledging their work is insulting, and shows a deep lack of information on ‘nerdistry’ going on outside the UCAB’s Economía school.

    • Wow, that’s got to be the harshest comment ever made on a post by someone who fundamentally agrees with its argument.

      To be clear: I have been at the Xerox tower a number of times, and I find the work at Wayra and Impact Hub truly inspiring. They are also patently insufficient as a national ecosystem for innovative entrepreneurship.

      It would be a nice follow-up piece to sit down with them and talk about their projects, their constraints, and what role they see for policy interventions in the field. If you could help us make it happen, please send us a number or email we could reach you at!

      • DISCLOSURE: Our company benefitted from Wayra in the past.

        I agree with Jose Ramón, while both Wayra and Impact Hub are trying to fly a cessna through a Hurricane (and more so their mosquito entrepreneurs), they are wildly insufficient for any kind of national ecosystem. Also I believe there is a lot to improve in the way Wayra (Vzla and global) and to its extent Telefónica think about nurturing and developing an entrepreneurial ecosystem as well as its partner companies.

        If you’re serious about wanting to follow up with them and do a follow up piece, I am very sure those contact details can be easily procured.

      • You didn’t say it was insufficient, you said you have not seen it, and if you’ve been there -as you say- then you’ve seen it… You just decided to ignore it based on your impression that their reach is limited.

        More than 150 *venezuelan* social innovations applied to assist to the Tech Camp hosted by the Impact Hub & USA embassy in June, while their capacity was below 60. In a country seriously hurt with the brain drain that Juan Nagel refers to, I just think those numbers are huge and deserve to be acknowledged.

        I don’t see much more people than that talking about how we should stay being a PetroState and ignore all other growth possibilities -not even Amanda-

        • Even though you might consider 150 applications a success for that specific program for the impact Hub (~3x capacity) aaaaand I agree they should be acknowledged as national heroes for even trying, the fact of the matter is that their reach is most definetely very limited. Just to give a bit of perspective on Latam “innovation” or risk/VC capital public ecosystem: ~250 companies in Chile are accelerated in “seed” stage ($15-40k/year in funding down from 50k in previous years) + total of $1.4B in innovation through CORFO just in Q1 2016.. Peru (who is arriving late at the party) is investing ~$20k in ~50 companies every 6 months through Startup Peru… And those are not even our most impressive neighbors (tacos and samba where their first exportable innovation).

          The truth is any source of public funding is a joke (I’m looking at you LOCTI). While Wayra (private) is doing ~$10k for ~20 companies a year, after which those companies have a potential life changing additional ~$20k in follow up funding for ~30% of their company from oblivious investors and maaaybe some hsbc/andorra cleanup crew that “really want what’s best for the creation of end value and growth”…

          • Maria, Juan … You are gathered here today to select weapons, take fifty paces away from each other, turn, and at the drop of a handkerchief from my hand, take aim, and fire. You, however, are not the targets for your shots.

            As one of many of Venezuela’s self-annointed unofficial physicians, it’s encouraging news to hear a heartbeat or two – or three or four, or even a hundred! (And I see each of your points of view. IMO the amount of capital required is in at least into the tens of billions, and that is just a guess based on write-downs by companies such as Colgate, Clorox, Kimberly-Clark, airlines, oil service companies, the cargo-container owners, etc.. And that’s Jose’s point – tens of billions. Maria’s point is that you have to start! And she/ they have. The companies that took write-offs are likely not in a bright and cheery mood about prospects of a return of capital.)

            Sorry for butting into a good fight. Hope I got in the way.

          • I agree with you, numbers are low… But they exist, they’re growing, and they’re visible! I

            Every sweat and every penny invested in development should be recognized and appplauded right now. Minimizing it or not acknowledging it based on their limited potential is insulting.

  9. I think that “let’s have a productive and well run oil industry and let the market take care of the rest” is not enough for development, but the big challenge is to figure out a form of political stability that doesn’t need spreading around showers of petrodollars.

    For example, a sovereign wealth fund formed from the oil income makes some sense to overcome macroeconomic challenges, but try picturing yourself as a candidate selling that idea to voters…

  10. You nailed it!

    30MM people in Venezuela which might be too much to be sustained by the oil money only, but which should be taken as a great advantage as there must be many ways to achieve successes with that much work force available.

    Education might be the key here, but here I am not referring to the high level of education many readers of CC have.

    In my humble opinion, Venezuela already has too many highly educated people in relation to the size of uneducated people or even the size of the population. Instead, there should be much more modestly educated Venezolanos. Those are the people who should represent the majority in the country. Had it been those who are suffering now “wiser”, would not have been “consumed” or “lost” by the fellow Venezuolanos nor the wiser dictator.

    I am not the one who is qualified to present ideas here, but, please allow me to present a scenario.

    One of the easiest, but seems to be a challenging way for Venezuela, is
    to make it tax heaven to invite the international manufactures to the country, which will require substantial changes in everything in Venezuela, to be a manufacturing factory for EU and Central and South Americas, and,

    keep working years to come until the industry is ready to benefiting from the technology transfer, and finally it is the time to have domestically established internationally competitive manufacturers.

    Those manufactures start investing in R&D in that industry, at the same time,
    now the government will have surplus from taxes which can be put into further enhance the education, security, social security etc.

    Once established a society with fine and stable economy and social environment,
    finally it is the time to start focusing on pure science which inevitably requires to attract top of the world scientists from the world to begin with.

    Venezuela definitely should not look for the way “Norway” has been going. Never ever will work for Venezuela.

    “Top of the line research” is not something to be taken into consideration to “sustain” a country, without needs to mention, not easy to attain even how much money your country has. It’s rather a culture of the nation. Venezuela has a lot of talented people without any doubt, but Venezuela does not have the culture as a strength of the country, even though individual Venezuelan do have the culture to be the top of the world which is for sure a part of Venezuelan culture.

  11. There is a saying that goes, “If all you have is a hammer, every problem looks like a nail.”

    José Ramón Morales Arilla self-describes himself as working “in development economics for countries with governments that want to deal with (some of) their issues.” As such, he only considers the power of the central government to lead economic development. He is on the right track with regards to the desired end result of a diversified economy, but he still sees the government as the primary force in creating the conditions for it and a need for the government to determine what economic sectors to promote.

    What is missing from his recipe is the decentralization of power. No amount of one-size-fits-all economic policy making by the central government is going to suit Barinas AND Nueva Esparta, OR Bolivar. Each of these regions have very different economic potentials. In private industry, they general managerial trend is to push decision making down to the lowest possible level. In government, the trend is the opposite, to create universal policy. This needs to be reversed.

    My prescription for Venezuela is:

    1. All state and municipal entities must survive through local tax collection instead of disbursements by the federal government. Property, consumption, and use taxes are the preferred vehicles of revenue creation.

    2. A thorough review of all organic federal laws to determine which can and should be eliminated and returned to the competency of local governments. Wherever possible, transfer federal agency functions, infrastructure, and personnel to local governments.

    3. Remove PDVSA completely from the control of the executive branch, creating a truly independent board of governors (like it was before Chavez). Gradually, wean all sectors of government off of the dependence on oil revenues for operation, forcing them to rely upon tax revenues and creating voter accountability. Divest PDVSA of all non-core functions.

    4. Once PDVSA is solvent again, disburse profits directly to Venezuelan citizens as a dividend, to be spent or invested as the citizen sees fit. The political power created by the power over oil rents must be eliminated. It is a danger to democracy and freedom, and especially to accountability.

    5. Eliminate all currency and price controls… at once. This will create a shock to the economic system, but it will be temporary. Create a temporary safety net of emergency food and medicine supplies to be distributed by local governments.

    6. ….

    Oh, hell! I could go on, but suffice to say it is going to difficult and painful. Nevertheless, it is a prescription for long-term reform that will actually work. So long as the functioning of the government is dependent upon oil rents, Venezuela will continue to suffer from political and economic instability.

    • Deeper decentralization can indeed be part of a new political arrangement that allows Venezuela to overcome oil opportunism.

      Moreover, I agree that productive development policies need to take into consideration the local realities to assess what’s the productive “adjacent possible” at the state and city levels.

      You should check these three projects we put together in Mexico (http://complejidad.datos.gob.mx/), Colombia (http://datlascolombia.com/) and Peru (http://acomplexperu.concytec.gob.pe/#/) that aim at doing precisely that – inform diversification and growth opportunities at a subnational level.

    • Stronger decentralization could indeed be part of a new political arrangement that deals with oil opportunism effectively. Moreover, I fully agree that productive development policies should build on subnational particularities. You should check out these tools we built for Mexico (complejidad.datos.gob.mx), Colombia (datlascolombia.com) and Peru (acomplexperu.concytec.gob.pe) to do precisely that – assess the productive “adjacent possible” opportunities for diversification and growth at the state and city levels.

      • I live in Margarita. No one needs to tell us how utilize our potential. What we need is economic, political, and juridical stability and security first, and after that, for Caracas to get out of our way.

        Just one small example is that Ley Seca (Prohibition of Alcohol Sales) policies are set by Caracas for the entire country. During the most important holiday seasons for Margarita, we are often forced to suspend liquor sales to holiday makers! Such laws and policies should be determined at the municipal level.

  12. You have to set aside substantial sums for agricultural research. A lot of USA’s wealth is built on productive agriculture, and a big contributor to that productivity is research at universities in the various states and agricultural regions. It would also be necessary to face up to the need for big farming units: peasants’ small holdings will never produce wealth much above subsistence level, either for the peasants or the rest of the citizenry. Co-operatives can be made to work (e.g., parts of Canada), but “collectives” have always failed.

  13. Allow me to link here to something I posted in 2010…about something Alexander von Humboldt wrote 216 years ago:

    http://venezuela-europa.blogspot.de/2010/08/humboldt-and-venezuelansund-venezolaner.html

    “images, often exaggerated, of the natural wealth of the country”

    It is amazing how even people who go to university in Venezuela and who often have been abroad – still a privileged minority – think Venezuela is so rich. They just need to do the maths…basic maths.

    Saudi Arabia has two million people less than we do and it produces several times the amount of oil at higher prices…and still it is now trying to change its way.

    Yeah, Norway was not as wealthy before oil was discovered there but it was not so much poorer than its neighbours.

    The wealth of a nation has always be linked to its people’s productivity and competitiveness but it much more so now.

    Back in the early XIX century almost all of the Norwegian population could read and write, Norway had people such as mathematician Niels Henrik Abel. Norway’s elite was very keen on investing in Norway and on its people.

    If Venezuelans want to move forward, its elites need to think in a more modern way than the Spanish “elites” of the late XVII century and all Venezuelans need to start measuring where they stand in the world race and what they need to stop getting further behind most nations.

  14. Man, chapeau.

    I guess the question then is how we can organize to achieve things like that.

    Weirdly, the true issue in vzla is political rather than economical.

    If one thing this AN has shown, it’s that the old ways are useless. I’ve been thinking about consejos comunales lately. Might be the perfect way to solve local problems effectively while organizing to put pressure on central governments, all the while acting as an enormous implicit negociation with chavismo that bypasses the Loonies In Charge and applying pressure on politicians to achieve notoriety by effectiveness rather than sex appeal.

    • Without mentioning the simple massive organizational potential of the CCs. Throught them, you can establish diplomatic ties with anyone from gang leaders to engeneers. It’s a powerful thing for a community of a couple of hundred to speak with the banner of the state. Think of all the levels of inter-CC networking that would be possible.

    • Or CDIs. One good way to make them operable without Cuban slavery is to find financial and other solucions on a consejo by consejo basis. Standards could begin to emerge.

    • I have to disagree with any proposal to make the CCs some sort of de facto governmental body. They have no standing within the Constitution. The actual state and local governments need to step up and do their jobs, and the public needs to be educated to understand the correct roles and functions of local government.

  15. Excellent. Well thought and perceptive. Couple of thoughts on the subject. The “petrocentrista” DNA in the venezuelan population has to be reversed. The idea of “ponme donde haiga” has to change. I guess its mostly through a really efficient educational system and instilling the concept of the “work ethic” as unpopular as that may be. It doesn’t matter how much oil Venezuela has underground but in today’s fast evolving technologies oil could go the way of coal…obsolete. And although there could be some industries that will always need it (chemicals and fertilizers), as a fuel it will be easily replaced. (have you heard of engines that run on water?) And finally: Venezuela has the greatest tourism potential of any country in Latin America, maybe with the exception of Mexico. Focus on tourism as a national development strategy, which has been done so successfully in so many parts of the world. Capitalize on the comparative advantages which this country offers: incredibly beautiful, exotic and varied locations, excellent climate and the friendliest and most beautiful people. And above all wealth (and poverty), like beauty, is in the mind (eye) of the beholder.

    • I completely agree with all your lucid comments. Sadly, Venezuela’s major problem, to try to pull itself up by its bootstraps out of its morass, is socio-cultural, with improvement, if at all, possible only after a massive educational/institutional change, which will take lots of time. The “nerdistry” expressed in this Blog is light-years away from the 80+% D-E classes of the Venezuelan population, who: are those that supposedly vote for their democratically-elected leaders, who in turn mostly have been in their own image; are woefully un-/under-educated/unprepared to effect any near-term change in the Country’s economic situation; and who are quite literally fast approaching pre-oil poverty/misery, without even massively publicly resisting their fate.

      • Sorry, NET., but the “nerdistry” in this blog often reminds me of the attitude of the Spanish elite when Spain was falling apart.
        If the “intellectual elite” (or those who claim to be that) do not get more involved into Venezuela, there is little hope for it.
        You do not do it by writing in English with Caraqueno slang on a blog. You have to communicate, interact with the D-E classes.

        • “You have to communicate, interact with the D-E classes.”

          This is what the MUD folks should be aiming to get more support, because as they are acting now, they attract the same target they have had for years, the middle class which was already opposition in a very high percentage since even before 1999.

  16. Again, an excellent piece that projects into a more hopeful future. The comparison to Trinidad is really an excellent one. Most of its exports are oil and gas, but this from Wikipedia catches attention:

    “Trinidad and Tobago has earned a reputation as an excellent investment site for international businesses and has one of the highest growth rates and per capita incomes in Latin America.” … “Trinidad and Tobago is the leading Caribbean producer of oil and gas, and its economy is heavily dependent upon these resources but it also supplies manufactured goods, notably food and beverages, as well as cement to the Caribbean region. Oil and gas account for about 40% of GDP and 80% of exports, but only 5% of employment.”

    https://en.wikipedia.org/wiki/Economy_of_Trinidad_and_Tobago

    For Venezuela to once again attract investment – and it isn’t just the money, it is the technology and expertise and experience – private property must be guaranteed, and “expropriated” property must be returned (at a minimum).

    The petroleum industry is very central to many economies, Venezuela included. Still I wonder if anyone with sufficient data could estimate, and balance, Venezuela’s food consumption, food production, food imports, and speculate not on “a plan” by central government, but “a production possibility curve” which private agricultural interests, large or small, would find opportunities for, to realize the possible – and maybe then some. There are pieces to the puzzle, and food production is one of them, like the power grid and generation, like the petroleum possibilities. Does anyone see any reason for which Venezuela cannot be self-sufficient in food, and a net exporter?

    The word “economy” has roots in Greek and is directly related to “household”. The notion of self-sufficiency is perhaps made more clear, with that reference. It is not exclusionary.

    • Thanks for your comment! Agreed that oil will continue to be key. The question is not either/or, but how to meet our export potential in oil while achieving higher growth rates in other sectors in order to decrease our oil dependence “sin prisa pero sin pausa”.

      While moving away from CADIVI’s “import promotion” strategy will yield lower imports as first outcome, I think that a new strategy should nudge around competitive exports. as a good disciplining factor that yields spillovers in a number of fronts – much closer to the east asian approach than from the import substitution philosophy.

      • Harina Pan is $3.xx a package here, in the U.S.. I’d buy Polar if I could find it – many years ago, you could get it from a beer store with brands from all over the world. I haven’t looked up tables of U.S. imports, but I would not be surprised to see Venezuelan sugar, and I know Venezuela has some of the best cocoa (not cocaine, but cocoa for chocolate). Fama de America is in supermarkets here, and other brands and foods I recognize from Venezuela. Cascos de Guayava. Most of it is Goya, which is, I believe, Republica Dominicana. Some Venezuelan suits may be very fine. Argentine beef is supposed to be some of the best, but I don’t know where to get any here. The U.S. used to impose huge (50%) tariffs on wool imports, or I might be importing rainbow-colored ponchos from Bolivia and Peru, marking them up 500% as “Designer Ponchos” and selling them to the Vail Colorado crowd to whom money is strictly a secondary consideration. I think all nectarines here are from Chile. Don’t know where the mangoes and platanos and yuca come from. I know this will make some here wish they could get their hands around my #$%^&*!! throat, but I can buy hallacas over the internet and have them delivered frozen to my door – it’s our capitalista imperialista pelucones esqualidos version of CLAP.

        Granted, this isn’t “massive exports to the world”, but like Maria (above) it is going, and it is a start.

        Personally, if you could make money exporting some of your Italian barbers … darn nobody up here knows how to cut hair. Emeralds and those gold orchids with pearls you find in Venezuela (or used to find) are something I’ve never seen here. Maybe I have no taste, or don’t know jewelry, but I don’t think I’ve found anything comparable in appearance and craftsmanship here. Maybe Faberge eggs, or Rolex, but I’m not in the market for that almost one-of-a-kind stuff. Jewelry exports from Venezuela seems like a possible, and it is all private enterprise which builds the trade balance.

        The thing that I keep running into, like brick wall telling me I’m stupid and just dreaming, an impractical fool, is that the Maduro government must go for any of these export initiatives. But at the same time, a man who cannot dream, who does not have goals and a future, is dead. So we look at possibilities, and plan, and get more incentive to get this Maduro weight off our backs so we can live. I said “we”. I lived there too long, loved it too much. To a part of me, it is “we”. You have support from all over the world, even people who never set foot in the country and felt the air at Maiquetia embrace them.

        Maduro will fall “prontico”. Cabello is already a “sapo con el mazo metido por dentro”. (You guys could a “Venezuela’s Got Talento” program!) Then these plans and dreams have to be ready, worked out, studied, and ready to roll. I still remember the interview with a llanero cattle man, khaki shirt and pants, weathered face, who said it would take a year [to reestablish his production]. I don’t think anyone could look at that guy and call him “impractical dreamer”. He’s got plans. His bulls have plans, too.

    • While economic diversification is a must , the trinidad and tobago figures , tell a story , they are diversified (exporting food and cement to the rest of the caribbean) , but a full 80% of their export income comes from oil and gas , an industry that employs only 5% of the population . If you look at Colombia the stats will show the same pattern, oil is the core foundation of their economic growth , Venezuela for decades lived on the oil industry which employed 40.000 people , all the other millions of workers produced only a fraction of the national wealth (10%?)

      Oil is the big ticket item in international trade, much more luchrative than almost any other economic activity, even though it employs very few people . now it is not so luchrative but even so it remains enormously luchrative compared to lots of other economic activities in which by the way competition is fierce and the players extremely efficient and knowledgeable about their businesses……!!

      Lets not kid ourselves , it will take a lot of time , intellegently designed economic and social measures, a lot of capital and a host of elite teams of expert managers and technocratic organizations for us to start creating an economy that is not oil dependent…….. lots of countries with a more diversified economy than our selves but with no oil live on the edge of economic failure..

      But having the oil is not enough , we must have people, an organization which know how to run it in a way tha maximizes its potential as a BUSINESS.!! and they must be allowed to operate the BUSINESS with autonomy ……….as business and technical professionals …….therein lies the main challenge for we are too accostumed to seeing oil as that grand national magic wand that allows politicians to play their populist games and remain in office forever !!

      • Bill – I don’t want to get too oil-nerdy because I know next to nothing about it, but here’s a link to, I believe, oil exports from countries around the world, with this page set to Germany.

        http://www.indexmundi.com/energy/?country=de&product=oil&graph=production

        Germany and the EU, apparently, import their oil, as does, I believe, Japan.

        https://www.cleanenergywire.org/factsheets/germanys-dependence-imported-fossil-fuels

        I see very clearly what you are saying. These are highly skilled economies with development histories going back thousands of years, never “poor countries” on a relative basis, and talking Venezuela / Germany comparisons is a bit apples / oranges. But Venezuela / Italy / Spain isn’t as big a difference. Heck, who can compete with the Germans? It’s almost sickening. The Russians can, and the Americans can, Ferrari, Maserati … but the Germans are stiff in engineering, and probably dream in diagrams.

        But really, looking at the production data, it almost seems as if having oil to depend on is a curse. Which opens up the whole Arturo Uslar Pietri theme all over again. The trouble with smart people like him is that everyone talks about what they said and what they meant … forever … trying to fathom it all. Texas is notorious for pawn shop sales and auctions of expensive toys (diamond Rolex, Ferrari, Porsche, Rolls) whenever the price of oil drops. So don’t think this is “a Venezuelan problem”. We have stupid people here, too.

        Relative to Venezuela what you say is very definitely true – I’m just trying to say that it is not at all impossible for Venezuela to move forwards. How long it will take, I don’t know, but agricultural self-sufficiency seem to be a first step that would not take generations – maybe just a few years. And there is already a ton of infrastructure in place, and installed capacity, in Venezuela, which if recovered and used in private hands, could be back in production in a few years, if not sooner. It’s not like having to built everything from nothing.

        Elmundodelcactus above makes the most challenging point, I think, in that private enterprise usually does not handle what even in the U.S. is a wide public education system. So that is one aspect of government, apparently. Private schools are still considered better, and public universities still charge money, but through high school, it is real estate taxes. If an engineer could get data on educational levels in Venezuela, including trade schools, maybe some estimates of what is there and what is needed could be done, submitted to the AN for consideration.

        Hay que pintar un futuro. One has to paint a future. It is not there already. I paint paintings for a hobby, and believe me, you almost never, ever, ever get it right the first time. Maybe Rembrandt, maybe Renoir, but not me or anybody I know. It’s just not the way you paint futures into existence.

        (Btw, as before, with great respect for you and your English, which is MUCH better than my Spanish … lucrative is correct spelling.)

  17. Comparing Norway and Venezuela is interesting, although Norway only has 5 million people. The 3 main reasons they do great with oil, while Vzla is a disaster are: Better educated population, much, much less corruption and a real justice system that will send crooks to jail. Thus, they avoided the infamous oil curse, unlike corrupt, under-educated, lawless countries like Vzla, Nigeria, etc.

    Comparing Chile to Vzla is also pertinent among latinos.. Chile has lots of copper and other natural resources. But after 17 years of Pinochet’s discipline, they got much better educated and much less corrupt than Venezuelans, with solid institutions now. And a real, independent Judicial system. Thus, they are doing quite well, while Vzla is sinking deeper and deeper into chaos and misery and crime every year.

    • “But after 17 years of Pinochet’s discipline, they got much better educated and much less corrupt than Venezuelans”
      That is rubbish. Please, get yourself a book or two of history of Chile for starters.

  18. I am suprised that development investors and such can go on talking escenarios with different numbers without the slightest mention of an almost unsurmountable problem: personal security. To invest in Venezuela and send people there to manage the company amounts to criminal negligence. If the officers, staff, and employees of the company arrive to work, there is no guarantee that they will make it home, nor that their goods will still be in the house when they get there. I lived there for more than 20 years before escaping with my family and our lives. Our return is a long, long way off because personal safety, especially as supplied by the state, is extremely questionable.

    • Thanks for your comment Michael. I totally agree: personal security can be a key constraint to new investments in Venezuela in many different sectors – The oil sector may be an exception, as large and foreseeable profits may allow for private solutions to this type of problems.

      However, I don’t think that you need to wait until a drastic drop in national aggregate violence indicators in order to appease this concern for latent investors. We should probably explore the idea of special economic zones / industrial clusters / charter cities, where access to proper institutions, regulations, infrastructure and public services can be provided fast – personal security being a key one.

      I find your concern specially taxing and hard to deal with for the Tourism sector, given that activities are not as geographically concentrated as they are in other economic sectors (for tourism initiatives different to “all-inclusive” developments). The DR even has a Tourism-Specific Police Force (http://cestur.gob.do/index.php/es) to deal with the situation. This is not necessarily the right solution for Venezuela, but you get the point: specific problems require specific solutions, not waiting until aggregate, systemic problems have been dealt with.

  19. “The idea that Venezuela, a country with over 30MM people, could be as rich as the Arab oil producers -or even Trinidad- if we just managed the oil sector adequately is a myth. El petroleo le quedó chiquito al país.”

    It’s not that “el petroleo le quedo chiquito al pais”, it is that some people, for political reasons, set off a demographic bomb in the late 60’s which some are still struggling to understand.

    Copei and AD opened the floodgates to the explosive expansion of informal housing in the hills of Caracas and other main cities for political purposes. Some of the people that settled in the hills were from the countryside but also from out of the country (Colombia, Ecuador, Bolivia, etc). And from the onwards, it has all been downhill. This is very well documented in books like Planet of Slums and various census of the population where you can check how the population grew at “African velocity”. We had no way to manage oil wealth with 10mm people, let alone 30mm. This is quite different when you compare it to some Middle East countries where oil wealth is not equally distributed. A country like Kuwait for example, populated by 4mm but of which only 30% are Kuwaitis and benefit directly from oil revenues.

  20. “If there is one critique on Uslar’s “Sembrar el Petróleo” I share is its unwarranted physiocratic bias. Why should we prioritize topocho sowing over medicine production?”

    Because agricultural development is the basis of any economy, and was the basis of economic development in virtually EVERY developed economy. Industrial revolutions were almost always preceded by revolutions in agriculture. Agriculture has important forward and backward linkages to the rest of the economy, and allows for other investments to be feasible, as it provides a large enough domestic market to achieve economies of scale.

    To put it in your terms, you don’t become a major producer of medicine until you are a major producer of topocho.

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