Wed, Feb 12, 2020 - Page 9 News List

Venezuelan emigrants are returning as Maduro embraces capitalism

Dollarization and Chinese-style state capitalism have given the Venezuelan government a new lease on life

By Patricia Laya and Alex Vasquez  /  Bloomberg

Illustration: Mountain People

Carlos Viloria came home to Venezuela last month. A 35-year-old lawyer, he had had enough of 15-hour days and abusive bosses as a restaurant worker in Argentina for a year and a half, one of more than 5 million Venezuelans who have left over the past five years, hoping to escape one of the world’s worst humanitarian catastrophes.

His return is also emblematic.

“I’m going to find a job that pays in dollars,” he said.

After leading his nation’s economy over a cliff, Venezuelan President Nicolas Maduro has brought it a certain measure of stability. By allowing US dollars to flow freely and private enterprise to flourish in recent months, he seems to have breathed new life into his regime. He remains widely despised, but emigration has begun to slow, people are returning, and the government is enacting laws to tax US dollar transactions and allow companies to issue debt in foreign currencies.

All are signs that, despite a triumphant world tour — including a White House meeting with US President Donald Trump — Venezuelan National Assembly President Juan Guaido, the opposition leader, is further away from ousting Maduro than he was a year ago when he announced that plan and won wide international support.

At the time, many wrote off Maduro. He had, after all, taken one of the region’s richest countries and run it into the ground through corruption and colossal mismanagement. Then a year ago, the US smacked Maduro with sanctions on oil. His country took a big hit and many believed he could not survive.

However, the doubters did not realize how much help he would get from key allies to evade sanctions or how he would adopt a version of Chinese-style state capitalism.

“The economies of the countries that have helped us are capitalist — China, Turkey and India,” said David Paravisini, a lawmaker in Venezuela’s National Constituent Assembly associated with Maduro. “To get their aid, you need conditions of economic liberalism. That’s what China did to move forward. It’s what we have to do.”

The new approach includes secret talks Maduro has had with holders of about US$60 billion of bonds, some of them American, offering to pair them up with a foreign drilling company that would be granted the rights to oil fields as a means of their recouping debt.

Venezuela has the world’s largest known oil reserves and if this deal came to fruition, many investors could reap enormous profits.

Several people who have met with Maduro recently say he is more confident than they have seen him in a long time. They spoke on the condition of anonymity.

Elliott Abrams, the US special envoy for Venezuela, disagrees.

“Why is this happening?” he asked reporters on Thursday last week, referring to the dollarization and privatization. “Because their backs are against the wall.”

Over the past year, the US dollar has become Venezuela’s unofficial currency, appearing in cafeteria menus and mom-and-pop shop windows blocks from the presidential palace. Across the capital, bodegas filled with French Champagne, vacuum-sealed salmon and Grana Padano cheese appeared where bankrupt shops had once been. The bolivar, the official currency, has become worthless through years of hyperinflation.

“What we saw wasn’t a liberalization, but a permissiveness, and in some cases a legal framework that existed, but wasn’t enforced,” said Tamara Herrera, chief economist at Caracas-based consultancy Sintesis Financiera. “The need arose because of progressively intensifying US sanctions. The new decrees show the government’s fiscal hunger and punitive nature.”

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