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Nicolás Maduro

Debunking the Myth that Venezuela is Freeing Itself from Socialism

As Venezuela ranks 188th in the World Bank’s “Doing Business” ranking, the reality is that Chavismo’s economic regulations continue to be abusive

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For the average American —and even for the average Latin American— it may be difficult to understand how it is that in a country with a poverty rate above 90%, there are people doing domestic tourism or driving modern cars, and some businesses even get to flourish. This scenario has led to misleading or biased coverage of the political situation in the country by different international media.

For example, on February 7, 2020, a Bloomberg article was titled as follows: “Maduro Embraces Capitalism and Emigres Are Returning.” Another Bloomberg article, this one from March 2021 was titled “Capitalism Maduro-Style Is Coming to Venezuela’s Gas Stations.” A New York Times article claims that “Venezuela’s capital is booming. Is it the end of the revolution?” We can find several articles and comments in social networks that pretend to reflect the reality of a small Venezuelan bubble that — in part— has been favored by doing business with Maduro’s regime.

In fact, last week a controversy arose in the country because some businessmen inaugurated a Starbucks store in the capital city of Caracas.

The arrival of a new international franchise surprised Venezuelans inside and outside the country. As a result, comments quickly appeared in social networks, and after investigations, it was discovered that the franchise was not really official and that it had been just a fraud of brand appropriation by the “entrepreneurs.”

The appearance of Starbucks led some people to give a new connotation to Maduro’s regime: it was, they claim, no longer socialism. According to some, it was not simple capitalism either, but anarcho-capitalism, and thus, through some articles in the international press and the comments (well or ill-intentioned) of some people, a so-called “right-wing Maduro” has appeared.

Venezuela
Citizens walk amid Christmas decorations adorning the city’s public spaces on December 22, 2021, in Caracas Venezuela. (EFE)

Is Venezuela better off?

If we analyze coldly the economic numbers of the country, certainly there is an improvement compared to the data of previous years. In 2021 for the first time since Maduro took power in 2013, the economy presents a not so pronounced contraction since for the last 8 years socialist policies have caused the country to lose 80% of its GDP. However, in the last cycle, the contraction will be approximately 1.5%, that is, it will still have a negative record, but not as devastating as in previous years.

In 2019, Venezuela’s accumulated inflation closed at 7.374%, while in November 2021 the same data registered 616%, i.e., they are still disastrous data in economic terms, but certainly better than those of previous years.

Even so, this year, extreme poverty in the country reaches 76.6%—that is, 3 out of 4 Venezuelans live on less than 1.2 dollars a day—and generalized poverty reaches the stratospheric figure of 94.5%. And yes, there are new businesses in the country, capital injection, and a very small part of the population living a life of luxury, but this is not the reality of a large part of the population.

The reality is that the economic figures for this year in Venezuela would be a catastrophe for any nation, and despite some biased headlines in the international press and certain videos on social networks showing “a better country,” the Venezuelan population continues to be immersed in poverty and hopelessness, while those close to the Maduro regime enjoy the money they have looted from the national economy.

Venezuelan citizens walk on February 16, 2021, along a highway near Cucuta, Colombia. Cúcuta, capital of the department of Norte de Santander and which has the main border crossing with Venezuela, is home to 96,133 of the more than 1.7 million migrants from that country who have settled in Colombia. (EFE).

Is there any change in the ideological stance of the Maduro regime?

It is wrong to argue that there is a new anarcho-capitalist regime in Venezuela, or that the free market has prevailed in the country. Socialism continues to be the ideological doctrine implemented by Maduro and his associates, who have absolute control of the national economy and manipulate the local currency at will.

The truth is that Chavismo has to some extent stopped harassing businessmen to allow trading in dollars and other currencies. Despite the fact that there are still regulations and prohibitions to carry out commercial transactions with any currency other than the bolivar, in the streets of Venezuela citizens exchange goods and services through dollars, Colombian pesos, Bitcoin, and other cryptocurrencies. This has brought some relief to local businessmen and entrepreneurs, who can now sustain their businesses without the fears of hyperinflation devouring their profits.

In turn, land border controls have diminished, this has allowed import and export operations of products to be carried out without the participation of the State, which in turn has energized the economy.

American economic sanctions have also helped the growth of the small economic bubble in Venezuela, since the regime’s leaders and businessmen close to Chavism, faced with the impossibility of safely locating their capital abroad, have decided to reinvest their money in the country, which in turn generates jobs and businesses.

The reality is that Chavism’s economic regulations continue to be abusive, Venezuela is ranked 188th in the World Bank’s “Doing Business” list. The socialist nation is at the bottom of the list when it comes to starting a business, obtaining construction permits, registering property, getting credit or paying taxes.

A mural of Maduro with Venezuelans in the streets. (EFE)

Dollarization of the economy

Certainly, Chavism decided to ignore the de facto dollarization of the Venezuelan economy, since it understood that this would help them to dynamize the economy a little, and at the same time, to launder more efficiently the money obtained from drug trafficking and other illegal activities. However, the socialist government continues to be present and to manage all aspects of the national economy.

In today’s Venezuela, if you are a small businessman setting up a food stand, it is very likely that the state will not bother you. You could even evade taxes easily without facing consequences. The problem in Venezuela is for large capitals that are not aligned with Chavism, because without legal security they could be easily expropriated, as it happened with Kellogg’s or other transnational corporations.

In short, to succeed in the socialist nation you must be with the regime, as it happens in Cuba and other countries with similar political systems. Today in Venezuela there seems to be a tacit agreement between Chavism and the population: you don’t protest and I let you trade with dollars so you can survive. This agreement is also a form of surrender.

Chavism cares little about tax collection: it is enough for them to embezzle the oil industry, and maintain territorial power for the exploitation of drug trafficking routes, there the hierarchs of the regime have enough wealth for the next ten generations.

In short, Venezuela is not much better off. Those who are more comfortable are the regime’s leaders, who finally found relief before an international community that does not reproach them; a U.S. administration that does not threaten them; a complicit opposition, and a population that seems to have resigned itself to the fact that in order to survive they have to follow Maduro’s rules.

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