|Trinidad and Tobago backs Venezuela |
SPECIAL TO BUSINESS DAY Thursday, August 10 2017
Venezuela, our close neighbor on the south-west border, has had a tumultuous history and is currently facing multiple interconnected crises.
Venezuela’s capital, Caracas, has seen almost daily demonstrations in recent weeks, some of which have turned violent, and critics are accusing President Nicolas Maduro of moving towards a dictatorship and are asking for his resignation. Maduro’s response, however, is that the opposition is conspiring with foreign entities, specifically the US, to destabilise the country. Venezuela has historically suffered political turmoil and autocracy, and economic shocks in the 1980s and 1990s led to several political crises, including deadly riots in 1989, two attempted coups in 1992, and the impeachment of a president in 1993.
Oil was discovered in the early 20th century and Venezuela, with one of the world’s largest known oil reserves, has been one of the world’s leading exporters. The 1980s oil glut led to an external debt crisis and a long-running economic crisis in which inflation peaked at 100 per cent in 1996 and poverty rates rose to 66 per cent in 1995 as per capita GDP fell. The result was hyperinflation, an economic depression, and drastic increases in poverty, disease, child mortality, malnutrition, and crime.
Some sources say that this oilrich nation came to its current state because of a long train of abuses, missteps and shortsighted moves which began when Venezuela nationalised its oil industry in 1976. The rationale for nationalisation was to take profit from capitalists and return it to the people.
However, when the government seized the oil companies, it removed the profit incentive. People had to develop and maintain the physical apparatus that brings oil to market, and eventually everything fell into disrepair. Sources say it also removed the loss incentive whereby decision-makers are forced to bear the consequences of their decisions as in private industries. Good decisions beget profit for decisionmakers, and poor decisions beget losses.
Subsequently, with a decline in oil prices and oil production, there was less tax revenue for the government. In fact, the high levels of consumption—fueled by imports rather than production— during the past decade came to a stop after a sharp drop in the price of oil, Venezuela’s main and almost exclusive export. When foreign currency stopped flowing in, the country was too indebted to keep borrowing.
The previous President Hugo Chávez, and later Maduro, had quintupled the country’s external debt. To obtain needed revenue, the government printed money. The unintended consequence was inflation and to slow inflation, the government imposed price controls which then led to food shortages and hoarding. To prevent hoarding, the government limited how much food people could buy.
Consequently, fewer people produced and transported food, and to increase food production, the government forced people to work on farms.
Beginning in February 2014, hundreds of thousands of Venezuelans have protested the high levels of criminal violence, corruption, hyperinflation, and chronic scarcity of basic goods due to policies of the federal government. On May 1, following a month of protests that resulted in at least 29 dead, Maduro called for a Constitutional Assembly that would draft a new constitution that would replace the 1999 Venezuela Constitution and would allow members of the Constitutional Assembly to be selected from social organisations loyal to Maduro. The proposal would be an alternative way to close the National Assembly and allow Maduro to stay in power during the interregnum and skip the 2018 presidential elections.
As a result, on July 30, the government staged a controversial vote to elect representatives to this new National Constituent Assembly.
President Nicolas Maduro claimed victory in the election and old allies Bolivia, Cuba, Nicaragua and Russia expressed their support. However, nearly a dozen countries, including Argentina, Brazil, Chile, Colombia and Mexico, have declared the vote illegitimate and joined the US in saying they did not recognise the results of the election. In May, Paula Gopee- Scoon, TT’s Minister of Trade and Industry, made the position of the TT government clear and reiterated the country’s support for the Venezuelan government of Nicolas Maduro. This may have been influenced by the fact that, in December 2016, the governments of Trinidad and Tobago and Venezuela signed an agreement, whereby some of Venezuela’s growing gas supplies will be directed to this country to alleviate the deficit. In March, this agreement was expanded to include the joint construction and operatorship of a 17km pipeline connecting natural gas in the offshore Dragon field to the Shell-operated Hibiscus platform to be shipped to Trinidad and Tobago and used as feedstock at its liquefaction facilities.
Trinidad and Tobago, as well as other members of CARICOM, have aligned themselves with the Maduro administration. One hopes that the government has considered the possibility that the US could enact broader sanctions threatening Venezuela’s oil trade.
The US is Venezuela’s largest export market and among the only markets where it earns cash for its oil, without which it would almost certainly default on its debt obligations. We must bear in mind that Trinidad and Tobago is a relatively small player on the geopolitical field and although we may not incur sanctions of our own, we shouldunderstand the implications for us, of any sanctions or other actions taken against or associates.