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.

18 COMMENTS

  1. “Next year we’ll likely see the same level of imports.”

    That’s interesting considering that some sources expect the Venezuelan GDP to fall almost 6% next year. They will probably cut somewhere else, then.

    • Using the basic calculation for GDP, lower/same imports actually helps raise GDP. The traditional calculation is C (consumption) + I (investment) + G (Government spending) + X – M (net exports/imports, or exports – imports).

      Nominally, governments in a recession cut interest rates and weaken the currency to promote growth and exports with the effect of making imports much more expensive, and which leads to a decline. A reduction in imports should be substituted by domestic production such that consumption expands or at least maintains its existing level as the country comes out of recession. However, the practical effect of the import cuts will lower GDP in Venezuela’s case because the intermediate impact of imports on the in-country value chains that exist. They don’t/can’t/won’t import the parts needed to maintain oil production, electricity, or even allow private sector imports and thus stuff doesn’t get made, which means it further stalls consumption/investment.

      There is quite a body of work on the effects of a recessionary environment on imports. Imports are pro-cyclical and tend to outgrow GDP when the economy is expanding; recessions cause cuts in imports and can be a driving part of income growth. However inputs to sustain production usually remain fairly constant relative to the aggregate demand. General consumption won’t be including things like Sony TVs, or new tractors for farms, but wheat, replacement parts, raw materials and the like (while down somewhat) will still come in to the country as needed import-inputs.

      However, Venezuela is in such a messy state that pretty much nothing is coming in except the bare minimum to keep things from exploding. So they can import the same and, in this instance, it will only detract from, not help GDP. This is ass-backward economics courtesy of your favorite Bolivarian Revolution. If only bartering could somehow be substituted into the equation…”I’ll trade you my broken down moto for 4 kg of chicken! Battery not included!”

  2. Well, next year we will see a reduction in consumption. They guy at SUNDDE is making sure that many people will not have jobs in 2017, therefore no income, therefore no purchasing power… You can add that to the many killed, the lack of paper money and the hordes of people that will run out of Venezuela, among other tricks of the revolution… Next year is going to be really bad, really really bad.

  3. “And there’s no help coming, because the government won’t accept it”

    Other countries might offer some food, but certainly no money loans.. Vzla’s international “credit” was ruined long ago. One of the problems with free food is that there’s no money in it. Can’t make shady deals, no room for corruption. Thus, not interesting. Any imports for that bunch of thugs must have a profit hidden somewhere.. so maybe they’ll import a bread-making machine, but not the bread..

    • La hambruna es la fase más reciente, la campaña de exterminio contra la población del chavismo comenzó utilizando a los criminales del país, prueba de ello es la impunidad que se montó en más del 97%

  4. According to a recent UCAB study, 2mm Venezuelans are eating from dumped garbage. Much worse hunger is coming, as the BM rate soars, oil production/prices stagnate or fall. Current scarce staple corn flour is being bachaqueado at Bs.5m/kilo, some 2 days basic minimum wage, and 10x current Govt.-controlled “precio justo”….

  5. “to the point of wondering whether it would be politically sustainable”.

    Ja! Venezuelas will take more and nothing will happen. A few saqueos (with a big smile in looters’ faces) and then back to the same misery. Venezuelans would be better off if they let Cuba govern them (not that that’s not the case now, but I mean, calling Castro their president). At least Castro seems to be smarter than Maduro. Poor, sad, subdued country.

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