It may seem hard, almost impossible to believe given its current circumstances, but once,
not so long ago, Venezuela was the envy of Latin America.
We’ve talked a lot about current-day Venezuela on this channel : we told you what’s happening--
why it’s happening--and even some of the things that may happen in the future.
And I think that what’s happening today is very clear to all of us.
After almost 20 years of the Bolivarian Revolution, Venezuela is a devastated country, a country
suffering a brutal economic crisis, food and medicine shortages, and increasing insecurity.
Something that, logically, has forced millions of Venezuelans to leave in search of a better
life.
Venezuela is going through a huge humanitarian crisis.
But hold on a moment, because it wasn’t always like that.
As I said, once, not so long ago, Venezuela was a prosperous country, a country to which
many people immigrated in search of greater opportunity.
Want to learn more about this other Venezuela?
Well, listen up.
(PROSPEROUS VENEZUELA)
As you all know by now, Venezuela has the largest known conventional oil reserves on
the planet.
We’re talking about more than 300 billion barrels of oil.
Yes, though its quality may not be the best, Venezuela has more oil than all of Russia
or Saudi Arabia.
And not just oil...
Many, many other natural resources as well.
(“Venezuela is a very rich country that has everything: iron, oil, gold, diamonds,
gas.
And a gang of criminals took it.”
The Puma Rodriguez)
Well, the fact is that there was a time when Venezuelans did know how to take advantage
of this huge fortune.
I’m referring to the decade of the 70s.
See, at that time, things in Venezuela were going smoothly and at full sail.
Things were going so well that Venezuelan tourists were known as the “give me two”
people, because they’d enter a store and buy everything.
‘How much is that?
Give me two!’
And, folks, in those years, not only was Venezuela well-off as a country-- more importantly,
its citizens were making money too.
That’s how a thriving middle class emerged, unemployment was at only 4%, and thousands
and thousands of kilometers of new roads were built every year.
Poverty, which now affects 9 out of 10 Venezuelans, didn’t exceed 20%.
Those were happy times.
There was so much excess that, for example, traveling to Miami became a common pastime
among the middle class.
And, do you know where one could find the best and most expensive French restaurants
in the entire region?
Exactly, in Caracas.
What’s more, Venezuelans became the largest Whiskey consumers in the entire world.
Yes, you heard that correctly.
Back then, it seemed like this country was going to take over the world.
You know: ‘How much is that?
Well, give me two!’
In fact, back then – unlike what’s happening today – Venezuela became a Mecca for thousands
and thousands of Latin American immigrants.
Everyone wanted to experience Venezuela’s prosperity.
And thanks to a democratic system that worked, Venezuela also became a refuge for many exiles
from Pinochet’s Chile and from the military juntas of Argentina.
However, clearly, one day that bonanza ended.
So the two questions we can ask ourselves are: How did Venezuela become such a prosperous
country?
And, why did everything end?
Well, let's see.
(THE LAND OF OIL)
Thanks to natural resources, to institutions that more or less worked – even
if it wasn’t quite Switzerland - and to a relatively well-educated population,
Venezuela was traditionally one of the most prosperous countries in Latin America.
“Venezuela was as rich as Norway in the 60s”.
El Español)
However, what happened in the early 70's went much further.
Here’s a question, can you think of any big political news from the year 1973?
Well, in October of that year, the Arab countries that belonged to OPEC, the Organization of
Petroleum Exporting Countries, decided to punish the countries that had supported Israel
in the Yom Kippur War.
Well, at least that was the official excuse.
But it’s also true that these countries had been negotiating with oil companies for
years to increase the countries’ income, and that negotiations hadn’t gotten them
anywhere.
Well, you know what they decided to do?
They blocked their oil exports to all those countries that had supported Israel.
This included the United States and much of Western Europe.
To give you a better idea, this action led to a huge cut in the world’s oil production.
A cut that hit the global market with enormous force practically overnight.
The effect was immediate.
Within a short time, the price of an oil barrel went from approximately $1.60 to almost $10.
Overnight, oil-producing countries had become very rich.
And as you know, Venezuela may lack some things, but you can get as much oil as you want.
Well, today they have the oil , but Maduro’s government can’t extract it, which is like
having none at all…
The fact is that this country was one of the great beneficiaries of the 1973 oil crisis.
Suddenly, not only had the price risen, but all Western powers were sticking to Venezuelan
oil as well.
With the blockade, it had become clear that Venezuela was a much, much safer supplier.
And that's how the petrodollars started to rain like there was no tomorrow.
And in 1975, President Carlos Andrés Perez decided to nationalize all the oil and created
PDVSA, the Venezuelan state-owned oil and gas company.
“Today, oil moves history, we must move with it”.)
From that moment, most of that petrodollar rain ended up in the state coffers... which,
of course, also began to spend it like there was no tomorrow.
Those were Venezuela’s crazy years.
In 1977, the practicing Venezuelan per capita income was twice that of the rest of Latin
America.
Caracas was a boiling pot, filled with buildings and projects everywhere.
But hold on just a second.
As you can see, this bonanza was mainly caused by the huge amount of petrodollars that began
to flood into Venezuela.
“Venezuela was a very successful country precisely because of the oil rent, which lasted
through the 1970s.
This income allowed the country to finance its services’ modernization”, Humberto
García Larralde.)
When a government starts receiving so much money so suddenly, it has two options: either
spend it like crazy or invest it seriously and use it to boost the national economy.
So, what do you think the Venezuelan government did?
Listen up.
(THE END OF THE DREAM)
With all the money produced by the country’s oil, the President of Venezuela, Carlos Andrés
Pérez promised that the country would fully develop within a few years.
Question: Guess what strategy he used?
Check it out.
With the oil money, a policy was launched that opted to close the Venezuelan economy,
set high tariffs, and restrict competition by developing local industries that could
create substitutes for imports.)
And this is what’s known as an Import Substitution industrialization policy, so typical of Latin
America and very well known among the Argentines.
“Industrial populism could be conceptualized as that version that puts import substitution
at the center of its economic policy”.
“They sell everything pricier than outside with the story that if they don’t there
won’t be any jobs.”)
Along with this, the increase in public spending that wouldn’t stop growing and the subsidies
paid with petrodollars – you know, to win elections – would be the way towards development.
The result of all this was that in a short time, doing business with the state or having
a good relationship with the government became the most lucrative activity in the entire
country.
And that always involves at least three problems:
First corruption is triggered.
Of course, if the way to make money is to influence a politician or an official’s
will... the envelopes always end up appearing.
“Mixed first with the people of Maracay and then of San Cristobal, Carlos Andrés
ratifies his promise to solve the problems of the popular classes from the government”)
Second, when the state is the largest source of opportunities and businesses, companies
specialize in producing not for consumers or the rest of the world, but for the state.
And, in the same way, the companies that manage to get on the government’s good side, with
restricted competition, are neither the most innovative nor the most efficient.
In the end, you create a dependent and rather unproductive economic system.
And third, all this implies that the government can’t stop spending.
In one way or another, everything is raised on public money.
In the end, there’s never a dime left and there’s plenty of debt.
“Closing the economy to foreign competition and subjecting exporters to a complex export
withholding scheme isn’t enough.
In order to grow on the basis of import substitution, one needs to provide demand, and one needs
to boost that demand.
And that's where public spending and the fiscal deficit appear.
In the long run, fiscal deficits generate bankruptcy situations in every economic program.”)
Well, that’s exactly what happened in Venezuela.
When in the 80s the price of oil began to drop... all of Venezuela’s prosperity also
began to collapse.
In 1983, when the so-called Black Friday occurred on February 18, the bolivar dropped against
the dollar.
That was the first warning.
But the government ignored it... it continued with its plan, spending like crazy and favoring
the friends of power.
In 1989, things couldn’t keep going and the Venezuelan economy underwent a huge crisis.
It was then that the so-called "Caracazo" occurred, a wave of protests against the government
that led to looting and clashes with state security forces, who didn’t hesitate to
use force in a completely indiscriminate manner.
The result was scary.
According to official data 276 lives were lost, and some unofficial data speaks of about
3,000 lives lost.
Venezuela had begun a race towards the abyss.
Well, folks, as you see, natural resources can lead to fortunes that can turn bad governments
into the worst of nightmares.
Venezuela had the chance to become a very rich country, unfortunately, they didn’t
follow the path that would have led them there, and today we know the outcome.
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the vocals in this episode that were not mine.
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