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When will Jeremy Corbyn admit he was wrong about Venezuela?

15 November 2017

11:43 AM

15 November 2017

11:43 AM

The socialist thugs who run Venezuela have made such a pig’s ear of running the economy that the country has now been declared in ‘selective default’ on its international debt. This week, Standard & Poor’s, the credit ratings agency, said Venezuela had failed to make $200m (£152m) in repayments on its foreign debt and that it was in ‘selective default’. Fitch and Moody’s have declared PDVSA, the country’s state-run oil company, in default, as well. Venezuela’s regime has already indicated that it wants to restructure its £100bn of international debt, including the £30bn or so that it owes Russia and China. Investors fear the worst and the haircut could be more than 50 per cent.

The government of Nicolas Maduro ­– the former bus driver who became the country’s president in April 2013 upon the death of socialist superhero Hugo Chavez – has reduced Latin America’s richest nation to the brink of bankruptcy through idiotic economic policies and out-and-out corruption. This beautiful Caribbean land with 32m people sits on top of the world’s biggest oil reserves at 301bn barrels (compared with Saudi Arabia’s 266bn barrels); since 2002, Venezuela has been in the throes of a socialist experiment that Jeremy Corbyn once hailed as the model for Britain.

The regime is trying to blame the US and the country’s middle class opposition for its woes but that is just not good enough. These problems are entirely self-inflicted. At the root of the crisis lies a crazy fixed rate exchange rate mechanism that feeds rampant corruption and the economic incompetents who manage the country show no willingness to end it. It is estimated that 100,000 cronies and friends of the regime get preferential access to dollars at the rate of ten bolivars per dollar. But once they have got their grubby hands on those dollars they are able to exchange every single one for an unbelievable 57,370 bolivars. The mark up is enormous and the government is terrified of terminating a deal that has benefitted the top brass of the military and the socialist oligarchy that runs the country. It has turned them into bolivar billionaires.

However, this ludicrous situation has reduced the country’s population to penury. The minimum salary in the country is 325,544 bolivars, including 189,000 in luncheon vouchers. At the official exchange rate that would amount to an $32,500 (£25,000) a month but at the black market rate is a measly $5.67 (£4.30) a month. And it is the black market rate that matters when you want to buy food or travel overseas.

Ordinary Venezuelans are suffering terribly but the country’s government – and Corbyn – seems to ignore their plight. For example, a small tin of sardines costs 11,000 bolivars, so the monthly minimum wage is the equivalent to only 29 tins. A bag of rice is 40,000, so the salary is the same as eight bags. Is it little wonder that 75 per cent of the population lost 19 pounds in weight last year? A third of the people eat two or fewer meals a day and it is estimated that there are up to 2m scavengers who survive by rummaging through refuse every day. Socialism is reducing Venezuela to a nation of tramps and down-and-outs. Things have got so bad in the country’s diabolically awful prisons that there have been reported cases of cannibalism.

And it is not Maduro that has caused these problems – rather they are part of Chavez’s legacy. It was the late president who embarked on a nationalisation programme that decimated the productivity of the country’s leading industries. One of his first acts in office was to reinforce state control of PDVSA and, cleverly, he sacked 19,000 of the firm’s most talented employees. The company’s daily production has plummeted to 1.9m barrels from 3.5m barrels in 1998.

But the agricultural sector has also been ruined by socialist policies. Chavez nationalised rice mills and expropriated millions of acres of land. But rigid price controls have made it unprofitable for farmers to grow crops and productivity has now nosedived. The socialists quintupled the country’s national debt, resulting in the massive debt servicing problem the country faces today. The country had to slash its imports by a mind-boggling 93 per cent during the past five years, so that it could free up enough dollars just to service the foreign debt. According to Capital Economics, the country and PDVSA have to pay in debt principal and interest $10.08bn (£7.65bn) this year while the nation’s total imports add up to only $17.3bn (£13.13bn).

In ruthlessly driving down the country’s import volumes, the regime has already been ‘defaulting’ on its people for several years. It is now about to default on its international creditors but they are unlikely to starve in the same way as the Venezuelan people have had to.

Jason Mitchell is a British freelance journalist who lived in Venezuela until 2014

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