How Low Is Rock Bottom for Venezuela?

At Foreign Policy José R. Cárdenas characterizes Venezuela’s present circumstances like this:

Already, there have been new outbreaks of looting in the face of rampant shortages of food and basic goods. Inflation, which hit a reported 2,616 percent last year — the highest in the world — will continue to surge in 2018.

And, worst of all, due to bad management and corruption, oil production has fallen to one of its lowest points in three decades, “further depriving the cash-strapped country of its only major source of revenue and adding to the suffering of its people,” according to CNN.

and speculates that Chavismo may hit rock bottom this year because of tougher U. S. policy and changing regional zeitgeist:

At the same time as an invigorated U.S. policy, broader changes underway in the regional landscape will impact Chavismo’s fate. Relying on friendly governments to provide diplomatic cover for his authoritarianism is getting increasingly difficult for Maduro, given the region’s ongoing political shift towards more pragmatic, market-friendly leadership. Beginning with Mauricio Macri’s assumption of the presidency of Argentina in 2015, then Pedro Pablo Kuczynski’s election in Peru in 2016, and the recent re-election of Sebastián Piñera in Chile (he served previously, from 2010 to 2014), voters are electing presidents with no sympathies for radical ideological projects like Chavismo. With six presidential elections scheduled for 2018 — including Brazil, Colombia, Costa Rica, Mexico, and Paraguay — that political realignment will likely continue.

The key issue here will continue to be the transition from rhetorical condemnation of authoritarianism in Venezuela to the implementation of more financial sanctions and diplomatic isolation. Such pressure is key to delegitimizing an unconstitutional government and raising the economic costs to the Maduro regime.

What would rock bottom look like in Venezuela? I would have said that they were already there and yet the system continues.

I’m far from convinced that it will be easy for Venezuela to dig its way out of the hole it has dug for itself. People keep pointing to corrupt officials but I don’t believe that’s Venezuela’s graver problem. Yes, there’s corruption. But Venezuela’s GDP is nearly $400 billion and a billion here or a billion there over a period of decades is barely a drop in the bucket. I think that Venezuela’s more serious problem is the subsidies the government has been applying for so long. They mean that people consume more than would otherwise in some areas while consuming less in others, produce more in some areas while producing less in others. Patterns like that can be very persistent.

Subsidizing gasoline is particularly problematic. When your citizens consume more than they otherwise would, it means there’s less oil to sell.