That’s a question I get a lot, and one I never feel comfortable answering. I say things like “We don’t even know exactly how bad things are: the longer we wait, the longer it will take for us to recover.” Or, “there are no shortcuts for economic growth, it takes time…” I have all sorts of sage sounding ways of saying “hell if I know!”

Even the question itself is tricky, what does it mean to “recover”? to get out of the humanitarian crisis? back to the “Venezuela Saudita” years? Just to start growing again?

Lucky for us, economists Douglas Barrios and Miguel Ángel Santos tackled that very question over at Prodavinci, giving it the scientific treatment it deserves, and man, things are looking grim.

They start by defining how bad things are.

If we add the 18.6% fall in GDP that was leaked to the press in 2016 to the official data that Central Bank (BCV) stopped releasing in 2015, Venezuela will have lost 29.2% of its economic activity per capita in just three years.

To get to 1977 levels in 5 years we’d have to grow at least 10.3% every year.

That’s no Traki discount. Shrinking per capita GDP by 29.2% in three years is a cataclysm. As they point out, only four countries have experienced worse numbers in a three-year period in the last 20 years: Libya, South Sudan, Irak and the Central African Republic: war does that to you.

They set out two recovery scenarios: 1977 and 2012, both bonanza petrolera years by the way.

Say a meteorite falls on Miraflores this morning and all the communists were there and Venezuela starts growing tomorrow. How much and for how long do we need to grow to reach the GPD per capita levels of 1977 and 2012? How likely is that to happen based on our experience? This is where the number crunching comes in:

To get to 1977 levels in 5 years we’d have to grow at least 10.3% every year. Again, this is no small feat: in our recent economic history (1961-2015) only 2% of the periods have managed to achieve this kind of performance.

So 5 years is too fast, what about 15? We’d need to grow at 4.0% every single one of those 15 years. Only in 10% of the periods in our history have we managed that.

And 25 years? 2.7% yearly growth. Just like the 20% of the periods in our history.

The Venezuela of the 70s seems like a distant dream if you put it like that, so let’s review the other recover scenario before we get hopelessly depressed.

To get to 2012 levels in 5 years we’d need yearly growth of 8.3%. Pretty unlikely, Venezuela has done that only in 2% of the periods studied.

Say we want to get there in 25 years, that should be plenty of time. We need a 2.3% of yearly growth, something that has happened in the 50% of the periods studied.

Dudes, you are killing me.

Venezuelan economic history is pretty bad; we hardly ever managed to string together more than four years of steady growth. That’s why Barrios and Santos throw oil production and the international experiences to the mix.

I recommend you go over there and read it for yourself, or at least spend some quality time looking at the tables and graphics. Let’s just say that the scenarios above aren’t that unlikely: Venezuela may not have experienced the kind of sustained growth needed to recover, but many better-run countries have. It’s totally doable, it’s just that we’ve never done it.

The next time someone asks me when will we crawl out of this hole, instead of glibly throwing back the 10 years thing, I can say something like: “if we manage to achieve a growth in oil production on the scale of of the “IV republic”, 1,420,000 barrels a day, and it still sells, we might get to 2012 GPD per capita levels in 10 years, we’ll just need a non-oil GPD of 4,4%. And 49,5% of the periods in economies worldwide have done that, we could too.”

Better, ¿no te parece?

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  1. Oh, hey, another of those “you’ll be screwed into critical poverty for the rest of your life so get used to eat bark and chew wires” articles.

    But according to some chumps, we have to somehow conform and be thankful for that.

  2. Back through all our ancient history, and Herodotus’ ancient history, anacyclosis has never been broken or reversed. Next stop: mob rule.

  3. “Say a meteorite falls on Miraflores this morning and all the communists were there…” See how easy it is to put a smile on my face?

    Before, we all fall into a deep depression, I am wondering if looking at past GDP growth for Venezuela is the right way. Have you ever been working on a project and lost the file you were working on? You had to start all over again. But, the second time, it didn’t take you as long, because you had already gone through the thought processes and you already knew what errors to avoid. So, even though you had to recreate the data and rewrite the text, it really took only half or third of the time it took you to do it the first time. I am thinking that the economic recovery for Venezuela could be the same.

    Also, I am thinking that a lot of the productive infrastructure is still in place. For example, let’s look at a cement plant that used to be owned by Cemex or Holcim. Sure, it was taken over by the government. They ran it into the ground. It isn’t producing cement any longer. They have probably looted the motors, instrumentation, cabling, and anything else that wasn’t nailed down. But, the foundations, the buildings, and the basic heavy equipment are still there. The existing plant can be recovered and put back to work with less capital and with less time than it would cost to build a new one from scratch. And, when it is put back in working order, many of the previous workers who operated the plant are still available to hire. Sure, not all are still there. New workers will need to be trained. But, again, you are not starting from zero.

    I am still sticking with my seat of the pants estimate of about twenty years to return to pre-Chavismo average GDP per capita.

    • This comment is pretty much spot on.

      Provided that chavismo can fall soon enough, most of the damage can be fixed in surprisingly few years. Venezuela itself is an example, with very big growth in 2004 following the “paro petrolero” years of 2002-2003. Of course, damage has been bigger and more permanent now, but the current GDP is completely depressed and does not reflect anything close to the potential. Even economies destroyed by war growth quickly after the end of it. The medium and long run will be a much bigger challenge, though.

      However, the longer chavismo can survive (and it’s looking far more stable now than a mere six months ago), and particularly the completely and increasingly crazy economic policies that they have been applying, the more permanent the damage will be: even more skilled workers will leave, less will be educated, less people with business experience will remain in the country, and so on, and so on.

  4. Here’s a prediction – how about 5 years?. All it would take is a coup, and the confiscation of the 10’s of billions found in Swiss accounts under the Family names of King Maduro, El Aissami, and the Chavez

  5. Part of this will depend of when and how chavismo finally croaks, and the case presented in this article is the optimistic one, in which it collapses at once and peacefully for the rest of the population.

    If important instability is to precede and follow the fall, then the resulting destruction might make the prediction even more pessimistic; the fact the property rights on some businesses will be a subject of conflict in the following years might make the outlook even grimer.

    On the other hand, the soil is rich, the underground even more and most of the brain drain which didn’t permanently established abroad might come back once their homeland is ruled in a more rational manner; depending from the world markets, foreign capital might be drawn in a place to rebuild and full of opportunities to catch: there’s plenty of roads and buildings to repair, of factories to reestablish and of fields and plantations to make regrow and cattle to tend (see Western Europe after WWII).

  6. Carlos, there really are too many imponderables, and an unlikely starting premise (sudden dinosaur-type elimination of Chavismo), to make any valid predictions, but the intent is interesting. Meanwhile, in a local Consejo Comunal, the leaders are telling their followers that, to better prepare for the future, they should learn to grow/produce their own food (no joke)….

  7. Isn’t everything peachy in Venezuela? Michael Moore said “He used the oil $ 2 eliminate 75% of extreme poverty, provide free health education 4 all” Why so ilent now Mr Moore , Sean Penn,Naomi Campbell,Oliver Stone etc

  8. Is interesting how many of the comments seems to miss the big point of the article.

    Venezuela will not recover in a long time if it behaves like it did in almost all the economic history of the nation, but what it would need to do it quickly are growth numbers that are not rare on the world.

    The point is, Venezuela cant just return to pre-chavismo. Pre-chavismo was also a failure. Venezuela needs a profound rethinking, a profound reform that put it in line with those other countries that routinely achieved sustained periods of growth that in Venezuela are mirages. Just returning to the pre-Chávez Venezuela in economic terms means either a very long process that may never reach recovery, or just another disaster when the next Chávez comes along to capitalize in the resentment born of yet another failure.

    It is a dire prediction but with a clear hope; the rest of the world has done it. There have to be examples, expertise, and it has to be possible.

  9. It’s going to be a long time before Venezuela emerges from the hole that Chavez and Maduro are digging.
    Not only have they pillaged the country, they have borrowed heavily and stolen that as well. So whenever the Chavistas are finally thrown out, you will not only be broke, but heavily in debt. The machinery to pay those debts is also broken and in disrepair, and the oil industry needs billions to fix the infrastructure. Citgo has been mortgaged off, and will probably default to the lenders when Maduro cannot make the payments.
    Even if many of the debts can be negotiated down, you still have rampant corruption, and it takes along time to stamp it corruption once it takes hold.
    By the time Venezuela digs itself out of the hole, oil will probably have been replaced by other forms of energy.


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