Is Venezuela’s radical socialist regime going capitalist? Is it proving the wisdom of the old joke from the days after the fall of the Soviet Union, which said that “socialism is the longest road between capitalism and capitalism”?
If you read the latest headlines from Venezuela, you may be tricked into believing that the country is making an economic U-turn, and starting a new era of free market policies.
But it’s an illusion. Judging from the opacity of the newly-announced measures allowing the sale of minority stakes in state companies to private investors, it’s more likely to be a scheme by Venezuelan dictator Nicolás Maduro that will only benefit top government officials, their families and friends.
The new measures will create a new crop of Venezuelan oligarchs who will make a fortune buying state assets on preferential terms, much like Russia’s oligarchs got rich buying state companies in Vladimir Putin’s Russia.
Maduro announced last week that he will sell to private investors between 5% and 10% of several money-losing state companies, several of which had been nationalized by former President Hugo Chavez.
They include the country’s CANTV telephone and internet company, which had been nationalized in 2007.
“We need capital for the development of all public companies,” Maduro said in a televised May 14 address.”We need technology. We need new markets and we will go forward.”
Maduro had already signaled an apparent economic opening last year, when he allowed growing numbers of transactions to be carried out in U.S. dollars. Since then, the Venezuelan economy has become almost entirely dollarized.
In Caracas, the capital, people are buying food at supermarkets in U.S. dollars, and use dollars to get a haircut or go to the dentist. New shops have popped up in the capital, and some restaurants in the city are once again full of well-dressed patrons almost every night, who pay their bills in dollars.
Several Latin American and Venezuelan exiled artists have returned to perform in Venezuela in recent months. Mexico’s pop singer Cristian Castro, Colombian Latin pop group Piso 21 and Mexican singer Emmanuel are among those scheduled to perform in Caracas in late May and early June.
Economists suspect that much of the current dollar economy comes from illegal gold trafficking, the drug trade, or is money that has been brought back from Russian, Swiss and Turkish banks by officials and government cronies.
Many enchufados, or “plugged in” — as Venezuelans refer to people with government connections — have reportedly repatriated their savings abroad because they grew uneasy over having their money in foreign banks, especially after the U.S. and European sanctions on Russia following Putin’s invasion of Ukraine.
The Credit Suisse bank has forecast a 20% growth in Venezuela’s economy this year, although the International Monetary Fund forecasts a scant 1.5% growth for the country in 2022.
But to put things in perspective, studies quoted by Bloomberg News show that Venezuela’s economy has fallen so much in recent years, that it would take it 10% annual growth rates over 18 years in a row to get back to its levels of 1997, the year before Chavez took office.
The real story behind the illusion of an economic opening in Venezuela is that Maduro’s regime is short of cash. While Venezuela theoretically benefits from rising world oil prices, its oil industry is in a shambles. And international sanctions on Russia have badly hurt Venezuela, because the Maduro regime had been using Russian banks to circumvent U.S. sanctions on Venezuela.
But it’s hard to believe that any legitimate Venezuelan or foreign investors will buy into Maduro’s latest measures.
“If you bought 5% to 10% of a Venezuelan state-owned company, you would be investing blindly, because there is no information, no governance, no rule of law, nothing,” says Pedro Burelli, a former advisor to CANTV when the company sold part of its stock to the private sector in the mid-1990s.
He added, “Besides, if you are a minority of a state-run company in today’s Venezuela, you don’t exist.”
Summing up, Venezuela’s alleged economic recovery is a small bubble of mostly illicit-sourced wealth in a country that has a 94% poverty rate, the highest in Latin America, according to a Andes Bello Catholic University poll. The only beneficiaries of the latest economic measures will be Maduro’s new oligarchs.
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