Venezuela: the future awaiting a nation brought to its knees

More than 3m people have fled a country with the largest oil reserves in the world as its economy is stifled by debt, but hope remains, reports Anna Isaac

• Money & Business 
• 3 Feb 2019
• The Lancet

Maria is struggling to concentrate as she speaks from her suburban home in Caracas, Venezuela. Her words are almost drowned out by her baby daughter, screeching as she crawls across the floor at Maria’s feet. Despite her hunger, the little girl is playing with a large bug and “she wants the world to know about it”, jokes Maria, who did not want her full name published.

It’s a shaft of light after dark days for the family and for Venezuela. Maria’s mother died from cancer two months ago, without access to proper pain relief.

Her brother tried to smuggle some opioids across the border from Colombia, but he couldn’t make it home in time for the final few days.

“It is the most disgusting … it is a thing so ugly to have seen,” she says.

Unable to elaborate further she trails off leaning down and temporarily out of Skype-frame to pull the baby on to her lap.

“But this will change now. We are changing this now.”

It may take years yet to see a new regime properly installed in the country, Maria says. Yet, unlike other times – even a year ago, she adds – “there is some fresh hope”.

Medicine shortages in the country are pervasive. Basic antibiotics can cost several months’ salary on the black market, where there are no assurances of quality. The morphine that Maria’s mother needed to have a more dignified death was not available.

Recent figures from have shown a 40pc increase in the rate of infant mortality. In just eight years the rate of 15 deaths per 1000 live births rose to 21.1 per 100 in 2016.

On average, Venezuelans have lost 11kg, or 24lbs, of body weight in the last year, according to a national survey. More than 3m people have fled a country with the largest oil reserves in the world.

Most development experts now say that comparing what was once one of the most prosperous nations in Latin America to other struggling economies is futile.

Basic statistics, such as million-fold rises in inflation, and an International Monetary Fund prediction of a 50pc collapse in real GDP by the end of the year, are becoming so extreme they are meaningless. In the chaos they are increasingly difficult to verify, too.

“It is best compared to a war zone,” says Alberto Ramos, of Goldman Sachs, an expert on the region.

Venezuela’s economy is almost entirely dependent on oil. Because of government debts, some of the largest in the world, this wealth is now largely diverted to creditors.

Shipments to the US once accounted for three quarters of the cash generated by oil exports. That lifeline was cut last week by new sanctions intended to bring down Venezuela’s leader, Nicolas Maduro. The US aims to install the selfdeclared interim president, Juan Guaido, in his place.

British and US diplomats, along with Guaido’s shadow government, are scrambling to prevent the Maduro regime getting hold of more than £1bn of Venezuelan gold bars held in the Bank of England’s vaults.

“This is an economic and political crisis two decades in the making,” says Helima Croft, a commodities expert at RBC. Croft, who worked for the US government during the Venezuelan oil strike of 2003, says that the country’s most important industry never recovered.

“This is not something that happened with the arrival of Nicolas Maduro. This is something that began with Hugo Chavez,” she says. In the aftermath of the strike, Chavez, who took power in 1998, began the destruction of what Croft calls “one of the premier national oil companies in the world” by making it “an organ of leadership” by sacking dissenters.

However, where Chavez at least installed technocrats who understood the oil industry, Maduro handed Venezuela’s energy wealth to military leaders with no understanding of the sector.

“He has turned it into a cash cow for the military. People are not getting paid. There is no money going into infrastructure or maintenance,” Croft says.

Expropriating resources, land, businesses and installing cronies in crucial roles are central to Maduro’s disastrous economic blueprint.

As international support for Guaido builds, so too does hope in Venezuela that change is possible.

Last week, the country’s congress formed a new committee to develop plans for a post-maduro society. Economic reform is at its centre.

Opposition politicians Juan Mejia and Jose Guerra, an economist by training, are the co-chairmen. They are trying to make “a coherent proposal for when things finally change”, Mejia tells The Sunday Telegraph.

The duo have been holding public meetings to build support for their enterprise.

“There’s a lot of tension in the air. A lot of expectation as well. I don’t think anyone believes that things will go back to how they were last year, at a standstill,” says Mejia.

The nascent prospectus plans to appeal to foreign investors to help fund Venezuela’s rebirth.

Mejia says the national oil company should not be sold off, but that competition should be allowed,

To address hyperinflation, currency controls will have to be eliminated, he adds.

Despite its heavy debts, Mejia says Venezuela will need to provide social security to tackle what has become a humanitarian crisis. He favours cash benefits rather than state-controlled food handouts, which have been used to bribe and punish voters.

Giving Venezuelans their own money will also allow private industry to return, Mejia believes. Normal, stocked supermarkets might again become part of daily life.

Economic restructuring talks are already drawing on insights from the International Monetary Fund, despite the bank’s public declarations that talk of a bailout for the country was “premature”.

“Up to now [contact] has been unofficial. I think that will change soon,” says Mejia.

The question for economists is not whether Venezuela can be revived in a post-maduro world but how long the task might take. “It’s going to take many, many years, perhaps a generation to rebuild the economy,” says Ramos.

He also warns there is no way to measure the country’s ability to pay debt. Gathering of reliable data has fallen by the wayside, thanks to Maduro’s leadership.

“Who are the creditors? It’s not clear cut. There’s a huge work of mapping liabilities of the Venezuelan state to be done,” he says.

The IMF, World Bank and others will all have a part to play, economists agree. “The country also has to find a way to unify. My optimism comes from the fact that this is not a problem without a solution. It can be fixed. It will be difficult. But not impossible,” Ramos says.

A sense of optimism is not peculiar to Ramos. Opposition politicians are revitalised by fresh international interest.

As for Maria, despite the pain of recent months, she still believes that her child will grow up to see a Venezuela that, she says, will “truly belong to its people.”

‘My optimism comes from the fact that this is not a problem without a solution. It can be fixed’

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