US Largely to Blame for Venezuela’s Crumbling Economy?

By Joe Emersberger

February 02, 2018 "Information Clearing House" -  In 1998, when the late Hugo Chavez was first elected, Venezuela had a poverty rate of about 50 percent despite having been among the world’s top oil exporters since the 1930s — and had governments that consistently had good relations with the United States.

In the late 1970s, at one of its most prosperous points ever as measured by per capita GDP, Venezuela’s child mortality rate was about double that of Cuba’s and Costa Rica’s.

In April of 2002, Chavez was overthrown for two days in a military coup. The New York Times editorial board said the coup was a victory for democracy and praised the soon to be ousted dictator, Pedro Carmona, as a “respected businessman”.

Prominent opposition leaders Leopoldo Lopez and Henrique Capriles led the kidnapping of a government minister while Carmona was in power.

Sixty people were killed in the uprising that ousted Carmona. The U.S. Office of the Inspector General conceded that the Bush Administration provided “training, institution building and other support” to groups involved in the military coup.

Two months before Chavez was overthrown in 2002, he floated Venezuela’s currency. It was set by supply and demand rather than at a fixed rate or multiple rates set by the government.

In other words, Chavez corrected what would become the government’s most devastating error in economic policy in recent years.

Months after the coup, the U.S.-backed opposition led a two month shutdown of the oil industry that drove the poverty rate over 60 percent.

The government reverted to a fixed exchange rate system and never again floated the currency.

Unfortunately, the exchange rate system has generally been credited by government supporters with preventing capital flight, and therefore contributing to the rapid growth and poverty reduction Venezuela experienced since the defeat of the oil industry shutdown until about the time Chavez died in March of 2013.

Even before oil prices collapsed in late 2014, Venezuela’s economy went into recession due to an inflation-devaluation spiral that should have been ended by floating the currency.

The oil price collapse made the problem drastically worse. Floating the currency again, as Chavez did before the coup, would require external financing to ensure that the poor are protected during the transition, as an economic team put together by The Union of South American Nations (UNASUR) recommended in 2016.

Torino Capital noted weeks ago that all of Venezuela’s $64 billion in outstanding foreign currency bonds are governed by New York law.

The Venezuelan government’s most valuable non-financial asset abroad is CITGO, a Houston-based corporation. It is obvious that the U.S. has ample financial power with which to harm Venezuelans if it is liberated from any moral or legal constraints by the U.S. media’s coverage of Venezuela.

That’s exactly what has happened. One now is more likely to find articles and op-eds in the U.S. media defending Saudi Arabia’s monstrous dictatorship than Venezuela’s democracy.

Years before President Donald Trump explicitly, and illegally, outlawed Venezuela from borrowing or selling assets through the U.S. financial system, President Barack Obama ludicrously declared Venezuela an “extraordinary threat” to the “national security” of the United States.

Obama’s belligerence, given U.S. financial clout, would scare away rational investors and deter loans — therefore increasing the stress on an economy already in crisis.

Trump, who has even threatened Venezuela with military assault, has simply unmasked the malevolence of U.S. policy entirely. His illegal financial embargo makes it nearly impossible for Venezuela to restructure its debt, an essential part of an economic recovery; and deprives more Venezuelans of food and life-saving medicines.

Since at least 2002, it has always been about putting U.S. allies in power in Venezuela regardless how many innocent people are hurt in the process.

ABOUT THE WRITER

A native of Ontario, Joe Emersberger is a popular opinion writer in Canada. He is a mechanical engineer and member of the UNIFOR trade union. Readers may write him at 2360 Kildare Rd., Windsor, Ontario N8W 2X7

This article was originally published by Tribune News Service -

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