Crisis in Venezuela

7 Key excerpts on "Crisis in Venezuela"

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  Latin America after the Financial Crisis

  Economic Ramifications from Heterodox Perspectives

  • Juan E. Santarcángelo, Orlando Justo, Paul Cooney, Juan E. Santarcángelo, Orlando Justo, Paul Cooney(Authors)
  • 2016(Publication Date)
  • Palgrave Macmillan

    (Publisher)

  The recovery of the crisis in the second half of 2009 reached values similar to those that existed in 2007. Despite similar prices to the ones registered during the previous expansion, the Venezuelan economy continued to deteriorate, showing the evolution of prices was not the only explanation for crisis. Notwithstanding, the Venezuelan econ- omy has ever recovered the previous levels of growth. The increase in GDP achieved since 2011 was slightly less than before the crisis; the external situation worsened, with a deficit in the balance of pay- ments, an outflow of reserves, and the increase of external debt. This new stage has also interrupted social and distribution improvements. In order to understand the reasons why the international crisis has hit the Venezuelan economy, we should refer to its particular produc- tive structure and its social and political features, with petroleum as its locus. After an overview of the situation of the Venezuelan econ- omy when the crisis started, we will analyze the internal effects of the crisis in the third section, detailing the evolution of the main macro- economic variables and the key sectors of the economy. Finally, we end the chapter by presenting our main conclusions. 9.2 Economy and History of Venezuela The economy of Venezuela could be characterized as a rentier-State model, 4 in which the abundance of the hydrocarbon contributes to shape an unbalanced structure. As some authors put it, Venezuela suffers from “oil intoxication” (Ominami, 1984; Baptista, 2010). Even though the country is the most industrialized country in the Organization of Petroleum Exporters Countries (OPEC), hydrocar- bons are almost its only export product, which shows a strong special- ization within world commerce and the international job division. The petroleum industry (and its derivatives) act as an export enclave, with only few relationships upstream and downstream, allo- cating most of its production outside the country.

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  A History of Big Recessions in the Long Twentieth Century

  • Andrés Solimano(Author)
  • 2020(Publication Date)
  • Cambridge University Press

    (Publisher)

  In the following text, we discuss some select examples of crisis episodes. 4 4 References examining Latin American economic crises are Dornbusch and Edwards (1991), Ocampo (1987), Foxley (1983), Calvo (1998), Végh (1992), and Beckerman and Solimano (2002). The record of inflation-targeting in Latin America is discussed in Céspedes et al. (2014). 167 8.4 High Frequency of Crisis and Contractions 8.4 High Frequency of Crisis and Contractions: Argentina and Venezuela Let us consider in more detail the cases of Argentina and Venezuela, both of which have experienced recurrent crises of the sort identified in the crisis categorization. A main paradox is that chronic instability takes place in two countries that are among the richest economies in South America. Argentina, with fertile lands, a respectable industrial base, and a well-educated popula- tion that in the early 1930s was among the top seven advanced economies of the world. Venezuela, in turn, is home of the largest oil reserves in the world, along with reserves of other valuable natural resources (e.g., gold). Of course, instability has prevented these nations from making full use of their economic potential, losing ground in their development levels relative to other nations. 8.4.1 Argentina In the 1970s, Argentina was affected by escalating political violence, cycles of military rule, and short-lived periods of democratic rule.

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  Bankrupt Representation and Party System Collapse

  • Jana Morgan(Author)
  • 2011(Publication Date)
  • Penn State University Press

    (Publisher)

  The proportion of the population in poverty more than doubled from 25 percent in the mid-1980s to over 60 percent by the end of the 1990s (CISOR 2001). Social ills escalated. From 1980 to 1998, the 92 linkage failure and venezuelan collapse homicide rate per 100,000 people rose from 12 to 22 (Arriaga and Godoy 2000), and Venezuela had one of the highest crime victimization rates in all of Latin America (Gaviria and Pagés 1999). The crisis presented increasing challenges for the party system. In inter- views, numerous traditional party leaders identified the pressures gener- ated by the mounting economic and social crisis as significant threats to the sustainability of representation and to the party system. Several pointed to the crisis and the parties’ failure to respond as the most important causes of collapse (Interviews 38, 39, 46, 56, 58, 66, 71). As a former COPEI leader put it, “Without the crisis, the party system would not have failed” (Inter- view 39). Economic and social problems demanded a response, and the par- ties needed to redouble their e¤orts to fulfill their duties to the people and address the issues confronting the country. However, “government did not answer the economic problems that were clearly developing” (Interview 15). Moreover, because the crisis stemmed from the deterioration and long-term negative ramifications of Venezuela’s model of state-led development based on petroleum revenues, conventional policy tools in the parties’ standard policy unresponsiveness and ideological convergence 93 Fig. 5.1 Annual unemployment and inflation rates, 1974–98 Source: Data from World Development Indicators and the Instituto Nacional de Estadística (Venezuela). repertoire were rendered useless. Responding to this crisis demanded that they step outside their comfort zone and engage in innovative policy making that still remained true to their character.

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  Moments of Truth

  The Politics of Financial Crises in Comparative Perspective

  • Francisco Panizza, George Philip(Authors)
  • 2013(Publication Date)
  • Taylor & Francis

    (Publisher)

  Crises and Their Consequences in Latin America Mexico in 1982 and 1994 and Venezuela in 1994

  George Philip, The London School of Economics

  Introduction

  The year of 1982 is writ large in the economic history of Latin America for all the wrong reasons. In 1982, a long period of economic growth came to an abrupt end and ushered in the so-called lost decade, which featured economic stagnation and in some cases hyperinflation. A number of factors contributed to this depressing transition, which continued in many countries until the adoption of so-called Washington Consensus economics at the end of the 1980s (Williams 1990).

  For a short period in 1982—and lasting no more than a few months—it looked as though Mexico’s president Lopez Portillo was contemplating leading a revolt against the world’s international financial institutions. In the end, the character of Mexico’s authoritarian system—with its strictly observed term limits—ruled out this option. With the inauguration of Miguel de la Madrid as president in December 1982, economic management in Mexico became one of the most orthodox in the region and has remained so ever since. This market reforming orientation later survived a further fiscal upheaval in 1994–1995— the so-called tequila crisis—with surprisingly little political drama.

  Venezuela, like most of the rest of the region, experienced economic problems after 1982. Despite having to devalue in early 1983, it would be too much to say that the country experienced a full-scale crisis in a way that Mexico clearly did. However, both the political system and the economy ran into increasing trouble at the end of the 1980s. A series of crisis events, including the collapse of the Banco Latino in 1994, shook the status quo over a period of several years and led to the election of Hugo Chavez to the presidency in 1998.

  For Latin America as a whole, the long-term consequences of the region’s lost decade were not wholly negative. The 1982 crisis played a major role in discrediting the authoritarian regimes that were then in power in most of the region. As it turned out, the subsequent democratization proved to be much more thorough and durable than most observers expected at the time. Mexico was part of the general Latin American trend toward democratization during the 1980s, though it had some specific features of its own. Ironically, despite its reluctance to democratize, Mexico proved to be more politically robust than economically successful until it suffered a further economic crisis in 1994. This crisis, painful though it was, enabled a decisive rebalancing of the economy to take place and led to even closer integration with the US.

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  Economic Development Strategies and the Evolution of Violence in Latin America

  • W. Ascher, N. Mirovitskaya, W. Ascher, N. Mirovitskaya(Authors)
  • 2016(Publication Date)
  • Palgrave Macmillan

    (Publisher)

  Economic Policies, Economic Outcomes, and Conflict in Venezuela In the Venezuelan case, shifting economic conditions interact with the gov- ernment’s choices about how it will utilize its alternately plentiful or meager resources. During the early years of Venezuela’s democratic regime, abun- dant resources facilitated providing not only stability but also prosperity to citizens. Petroleum-led prosperity, substantial social spending, and economic protections for elites, combined with political inclusion successfully limited social conflict during the Punto Fijo period. Notably, during the Punto Fijo period, Venezuela enjoyed a comparatively more equitable income distribu- tion than in most Latin American countries, as well as relatively high state spending on education and health (Di John 2009). Yet, policies during the 1960s and the 1970s also led to an insurmountable debt, while failing to develop adequate alternatives to oil dependency. The dramatic shifts in oil prices therefore hit Venezuela hard, especially the government, which has consistently relied on oil revenues. Successive governments delayed adjust- ing spending habits for some time, until Carlos Andrés Pérez enacted his incendiary reforms. During the Chávez period, social spending has again increased, but within the context of political exclusion and the economic elites’ relative loss of privilege and protections, thereby leading to increased conflict as evidenced both by intensified protest and military insurrection. 172 ● Deborah L. Norden Oil wealth has often anchored explanations of Venezuela’s successful post-1958 political stability. According to Terry Karl, the oil industry drew many agrarian elites into trade and encouraged rapid urbanization, thereby diminishing the potential for urban-rural cleavages (Karl 1987). Oil wealth also meant that the government had sufficient resources to satisfy many different interests.

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  Exchange Rate Politics in Latin America

  • Carol Wise, Riordan Roett, Carol Wise, Riordan Roett(Authors)
  • 2011(Publication Date)
  • Brookings Institution Press

    (Publisher)

  27 Ailments at the level of political parties—namely, the stranglehold of old party elites despite significant socioeconomic changes—thus explain Venezuela's repeated ax-relax-collapse cycle as well as its susceptibility to the 1998 shocks. Venezuela started 1998 with a pending agenda of structural 140 JAVIER CORRALES reforms, including some basic first-generation market reforms (fiscal streamlining and deregulation, for example), as well as a set of Venezuela-specific reforms (for example, Fondo de Estabilizacion Macroeconomica). Furthermore, Agenda Venezuela generated its own set of problems, specif-ically, greater reliance on oil, which unnecessarily magnified the impact of the 1998 oil price drop. The credibility problem of the state and politicians reached yet another peak. Understandably, economic agents lost all trust in the governments capacity to deliver. Popular sectors, for their part, were simply fed up with reform efforts that never worked. Hence the most antireform, antiparty presidential candidate of 1998, Hugo Chavez, rose to the top in the polls, in turn infusing new levels of uncertainty at home and abroad. All of this was the direct consequence of the ax-relax-collapse cycle of reform efforts. The State s Response: The Central Bank to the Rescue Once the shocks hit, Venezuela faced two policy options: announce a pack-age based on devaluation plus deeper structural reforms (the IMF solu-tion), or simply defend the bolivar. At the heart of the matter was the need to decide between moving toward a more flexible exchange rate regime— following in the footsteps of Mexican and Brazilian policymakers—or upholding the existing quasi-fixed exchange rate regime. Since the 1980s Venezuela has experimented with all kinds of exchange rate regimes: multiple, controlled exchange rates (1983-88); free but sta-ble exchange rates (1989-92); crawling peg rates (1992-94); and fixed, controlled exchange rates (1994-96).

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  Latin America After Neoliberalism

  Developmental Regimes in Post-Crisis States

  • C. Wylde(Author)
  • 2012(Publication Date)
  • Palgrave Macmillan

    (Publisher)

  Part III Post-Crisis Political Economy in Latin America: Global Lessons? 187 Part II demonstrated that the economic crises in Argentina and Brazil inflicted pain (in the case of Argentina severe pain) on the less well- off in society, with the lower and middle classes bearing the brunt of restructuring. Indeed, this conclusion can be extrapolated across time and space, and therefore be said to be true for all economic crises in all countries or regions. It is also true for the recent global financial crisis, or the ‘Great Recession’. However, while the social costs of crisis demand our full attention, crises are also particularly important events for the larger debates over economic ideas that they set in motion. Moments of crisis show economic paradigms in clear view and the ensuing contest of models opens up the possibility of economic change (Robertson, 2008a: 1). Indeed, the repetition of currency, sovereign debt, and/or banking crises in Latin America, and their appearance also in Asia and in almost every other region in the developing world at some point, as well as most recently in the developed world in the form of the ‘Great Recession’, has spawned a voluminous academic, policy- orientated, and even journalistic literature, especially in the last decade (Porzecanski, 2009: 8). In the context of Latin America one universally emerging trend is realisation of an increased reliance on and role for the state in ways unthinkable only a few years ago (Cox, 2009: 145). The analysis of this book is no exception to this trend, showing in Part I that Latin America as a continent has taken a ‘left turn’ – dubbed the pink tide – ever since 1998 and the rise of Hugo Chavez in Venezuela, and that this phenom- ena can be partially interpreted as an increasing role for the state in development. This conclusion was further cemented in Part II through the examination of two detailed case studies: Argentina and Brazil.

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