Still Report #878 – Venezuela Spinning Out of Control

from Bill Still

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Good afternoon. I’m still reporting on the economy.
This year so far, we’ve focused most of our reports on the political situation in the U.S. and Europe, but not a single report on South America.
It’s richest nation, Venezuela has collapsed economically and its neighbor, Brazil is in a such a deep recession that it may cause the cancellation of this summer’s Olympic Games, which Brazil is hosting.
Venezuela is spinning out of control and is on the verge of becoming a failed state. Food riots occur daily.
Food is in such short supply that inflation on food items is running at 583% and wholesalers say there is less than a 15-day supply left in country.
According to social watchdog Oscar Meza:
“We are officially declaring May as the month that [widespread] hunger began in Venezuela.”
How can this be possible in a nation which has more proven oil reserves than anyone on the planet, including Saudi Arabia?
It all started when a Lt. Col. In the Venezuelan Army, Hugo Chaves staged a failed military coup against a democratic government, then later got himself elected as president in 1998.
He installed a hybrid government – part communist, part socialist, with a slick covering of populism – that allowed him to maintain power for 14 years until his death from cancer in 2013.
He bullied his opponents, rigged elections to keep himself in power, and encouraged the entire middle class to get out of the country. He spawned Marxist imitators across South America and sent aid to Cuba to keep the Castro brothers in power long enough for Obama to rescue them.
At home, he spent wildly on social programs and handouts to his supporters, ignoring the fact that the incentive-driven economy was quietly disappearing with the middle class.
Now, the evil fruits his dictatorship have finally manifested themselves in his nation, which is now run by his Vice-President, Nicolás Maduro.
Last December, parliamentary elections were held and the Maduro government lost control of the legislature. Maduro threatened:
“I will stop by hook or by crook the opposition coming to power, whatever the costs, in any way”.
Maduro tossed out the Venezuelan Supreme Court and installed one consisting of justices he controlled.
Then he had the new Supreme Court suspend several of the newly-elected MPs.
As both inflation and shortages continued to increase into the new year, on January 16, 2016, Maduro made himself the sole repository of all executive and legislative power – an outright dictatorship.
Today, the capital, Caracas, has one of the highest homicide rates in the world – 122 per 100,000 – 23 times higher than Chicago’s in the U.S.
Today the city is ruled by armed gangs, loyal to the government.
Drug trafficking is so open that even members of the Venezuelan National Guard were caught putting 1.3 tons on a Paris-bound flight, but no one was prosecuted.
Electricity is in such short supply that the government has been reduced to a 2-day workweek to save power.
When the average person gets their hands on some money they rush to the grocery store to spend it before prices go up.
But recently stores have been cleaned out by food rioters. Now, everyone is stealing anything they can to sell on the black market to get money for food.
Today’s NYT reported that a referendum to recall President Maduro is gaining support in Venezuela, but as it does, Maduro continues to ratchet up his repression.
They also reported that the only thing preventing Venezuela from defaulting on its national debt are massive loans from China.
Again, why a wealthy country like Venezuela resorted to a national debt remains a mystery, but today that national debt is killing the economy on the debt side of the equation; while the lack of incentive-drive productivity has already destroyed the production side of the economy.
“Mr. Maduro suffered a further blow last week when President Dilma Rousseff of Brazil, a close ally, was temporarily ousted from power and awaits an impeachment trial by the Senate.”
Brazil will host the Olympics is just three months. It too is in the midst of a massive recession and there are increasing calls for the entire Olympics Games to be postponed until the political situation clears.
Of course, that would lead to an even stronger collapse of the Brazilian economy which has bet heavily on recouping many of their construction expenses from the tourism and TV revenue involved in the Olympics.
Where this will end, no one knows, but some say it there will be civil war soon in Venezuela. Some group, financed by some nation, will mount an army to take over in an attempt to restore order.
Typically, civil war doesn’t end well for democracy, but then, in Venezuela, it could hardly get worse.
I’m still reporting from Washington. Good day.