Corruption and Progressive Isolation

At the end of 1959 my wife and I spent our honeymoon on the island of Margarita, off the coast of Venezuela. We were at the beach one morning and I saw a nine or ten year old boy passing by. I called him and asked him if he could get the day’s newspaper for me. I gave him a “fuerte,” a five bolivars Venezuelan coin, no longer issued, which has almost an ounce of silver. Seeing the boy walking away my wife said to me: “You probably will never see him again.” About 90 minutes later he was back with the newspaper and my change.
Margarita Island did not have a jail in those years. We remember a gentleman selling pearls in Porlamar, the main town on the island, who gave a free real pearl to every visitor who told him he, she, had his same family name. Of course, we all claimed to have it and we all received a free real pearl from him.

During those years Venezuela had the fourth largest Gross Domestic Product (GDP) per capita in the world, after the United States, Switzerland and New Zealand. GDP per capita for South Korea in 1960 was one fifth of Venezuela’s, Spain’s one fourth and Chile’s about one half. The Venezuelan bonanza was both economic and social. Venezuelan workers enjoyed the highest income in Latin America. During the preceding decade the country had received about 1.5 million immigrants from Spain, Portugal and Italy, as well as thousands of Latin American political refugees from the multiple dictatorships prevailing in the region, particularly in Argentina, Chile and the Dominican Republic. The country received them in the same spirit as that of the U.S., with the same words we see at the Statue of Liberty: “Give me your huddle masses, yearning to be free.” Venezuela was an example of democracy and generosity for the whole region.

Today, the situation is the exact reverse. Venezuela ranks last or close to last in all international economic and social indices. It has the largest inflation in the world and is afflicted with hyper-corruption. The country is under a cruel leftist dictatorship and is experiencing massive emigration, which includes the sons and grandsons of the original immigrants. Financially, it hangs on the precipice of default. One international index says it all: Venezuela is today ranked as the most miserable country in the world

How has this debacle taken place?

The reading of Raul Gallegos’s book: “Crude Nation: How Oil Riches Ruined Venezuela” provides a significant portion of the answer. This is a brilliant piece of investigative journalism by a veteran journalist who lived in Venezuela from 2004-to-2009. During his long stay, Gallegos interacted with Venezuelans from all social strata, from the rich to the very poor, as well as with government sympathizers and victims of the increasingly arbitrary and inept dictatorship. He collected his observations and the result of his multiple interactions with Venezuelans into a book that offers extremely valuable information and insights, much of it new to even the best informed observers of the Venezuelan tragedy.

In this fascinating book you will know why Venezuela today is, simultaneously, the cheapest and the most expensive country in the world, depending on whether you have dollars in your pocket or if you are a Venezuelan getting paid in local currency. Gallegos would stay in the best hotel in the capital city of Caracas and every month saw how his rent got cheaper, while for the Venezuelans around him the cost of food and medicines doubled in price every month.

Each one of the seven chapters of Gallegos’s book describes a bizarre aspect of Venezuelan life, immersed in economic and social chaos.

The subtitle of the book: How oil riches ruined Venezuela is probably unfair to oil. I strongly feel that corrupt Venezuelans, not oil, ruined Venezuela. Although oil was the weapon utilized to do the job, this commodity was only the weapon put in the hands of the ignorant and corrupt gang that seized power in Venezuela in 1999 to assassinate the country.

In the first chapter, Gallegos describes the economic distortions in the country. One of the consequences of this distortion has been the progressive isolation of the country, as less and less Venezuelans can afford to leave the country, since airplane tickets are mostly sold in dollars, always less accessible to common Venezuelans.

In Chapter Two Gallegos narrates the daily life of Venezuelans trying to acquire food and essential items and having to depend on re-sellers to do it, the so-called “bachaqueros,” Spanish for “ants,” those who have connections with the government and are able to sell food and goods at inflated prices to people who cannot acquire them in a normal manner.

Chapter Three has to do with the changes in policies Chavez instituted in the country. I feel Gallegos gives Chavez a little too much credit for trying to erase poverty. Poverty is now greater than when Chavez came into power. What Chavez did was to handout cash, as if this represented the solution to poverty. When money ran out, as it did, Venezuelans turned back to being poorer than before.

In Chapter Four Gallegos gives a fascinating description of the attitude of many Venezuelans, narcissistic and frivolous in the face of adversity, believers in luck and chance rather than perseverance and savings.

Chapter Five narrates the experiences of some of the main private companies in the country and how they are managing to survive in such an unfriendly environment.

Chapter Six is dedicated to the oil industry and describes the corruption in that sector and how mismanagement has dealt a death blow to the state oil company, Petroleos de Venezuela.

Last, but not least, Chapter Seven is an excellent attempt at explaining the reasons for the Venezuelan social collapse.

Raul Gallegos’s book is a convincing argument against state intervention in a national economy and describes very eloquently the almost incredible ineptitude of the dictatorial regime. The author explains in a most persuasive manner how a country like Venezuela, so full of promise and well-being only 40 years ago, could be turned into a failed state after 18 years of mismanagement and corruption.

Gustavo Coronel, who served on the board of directors of Petróleos de Venezuela (PdVSA), has had a long and distinguished career in the international petroleum industry, including in the USA, Europe, Venezuela and Indonesia. Mr. Coronel was also the Venezuelan Representative of Transparency International, a Berlin-based organization fighting corruption. He is an author, public policy expert and contributor to SFPPR News & Analysis.