For the politics junkies who read Caracas Chronicles, it’s easy to look back on 2016 as The Year of No Recall Referendum. But for normal Venezuelans, that story’s a footnote. For most people 2016 will go down in history as the Year of No Food.
The country’s descent into a full-blown humanitarian crisis has proven our February post about falling food imports to be both accurate and naïve.
With less food being imported, and less food being produced, la dieta de Maduro estaba cantada.
Starting in 2008 and up until 2014 (the last year with official data), imports of food rose to unprecedented levels, both in terms of value and volume: by 299% and 74.5%, respectively, compared with the average for 1998-2007. During those oil boom years, imports of food were $8.1 billion yearly, on average. While this happened, domestic food production sank under the weight of government regulations and controls, competition from cheap subsidized imports, and the government’s preference for imports over the local private sector. Of course, that meant that if imports ever fell, you couldn’t really expect this weakened and oppressed private sector to pick up the slack.
Back in February, this basic dynamic was already clear. Given its track record, it was clear the government couldn’t be relied on to boost public sector food production. But neither was there much reason to hope it would shift policies to help the private sector produce more.
With less food being imported and less food being produced, la dieta de Maduro estaba cantada.
But never in our wildest dreams did we imagine the government would be willing to squeeze people’s pockets and stomachs to the sickening extent it has done.
The question at the start of the year was just how low overall imports could go. Most economists had in mind a number in the $27-30 billion range for 2016, down calamitously from $38 billion in 2015. We expected a cut on that scale to be extremely painful, to the point of wondering whether it would be politically sustainable.
Imports will probably close the year around the $20 billion mark; a sickening 47% cut from 2015.
Even if big time efforts were made to protect food imports from these cuts, it was clear on that level of imports people would face more food shortages and rationing. Because you can’t really import only food: the Venezuelan economy is too deeply enmeshed in global supply chains to run without a steady flow of imported machinery, intermediate inputs, etc. Hell, you can’t even produce Venezuelan extra-heavy oil without importing foreign oil to mix it with.
Alas, the government turned out to be more irresponsible and heartless than we thought possible.
Imports will probably close the year around the $20 billion mark; a sickening 47% cut from 2015. And it looks like these cuts were made across the board: food imports were not spared.
As feared, the adjustment fell directly on people’s stomachs.
Next year we’ll likely see the same level of imports. The government might allow for a little more if oil prices increase to around $45 per barrel, as most estimates expect, but even then they would not rise to the $27 billion mark we thought dangerous just ten months ago.
This year taught us what’s really important for the government in terms of economic policy: foreign debt payments. Those stand at around $12 billion next year, about the same as this year. But next year they’ll have fewer assets to sell, less foreign reserves, and less oil to sell.
And there’s no help coming, because the government won’t accept it.