Theory & practice burak Akçapar Turkish ambassador, scholar and author
The news and pictures coming from Caracas reminded me of a former Venezuelan oil minister JPP Alfonso, who said, “We are drowning in the devil’s excrement.” As Michael Ross in his The Oil Curse said, “Since 1980, the developing world has become wealthier, more democratic, and more peaceful. Yet this is only true for countries without oil.” The so-called Oil Curse is not inescapable. In fact, there are many exceptions to the argument that too much oil causes economic and political problems. It is not true. For instance in Norway, Canada, the US or UK who have diversified economies. A host of several other countries from Mexico to Indonesia have also been able to escape the resource curse. Yet, there are many countries where the curse holds true. One is Venezuela, which is going through a rough patch.
Over 120 people died in street clashes between anti-government protesters and the police, and the saga continues. The crime, including homicide rates, are reportedly soaring, and food and medicine are in very short supply. A humanitarian disaster is looming large. All this happens in a country which is soaked in oil. Venezuela finds itself as a victim of its overwhelming reliance on oil. Some 96 per cent of the export earnings and one-fourth of its GDP is based on oil sales.
That is far too much dependence on a single source. Any economic management, which could not diversify the country’s sources of revenue, cannot be characterised as sound and successful. When the oil prices were faring above $110, there was little problem. But when the oil prices dived to $27 per barrel in 2016, the economy dipped and the whole country, including its peace, floundered. When the oil revenues were high, the government had put the emphasis on short-term quick fixes to the woes of the country’s poor. Social services were expanded and the government provided subsidies to housing, healthcare and education. In a matter of 14 years, the government decreased the poverty rate from 50 to 30 per cent. On the face of it this was a great success and the people loved it. The charismatic President Hugo Chavez died in 2013, and President Nicolás Maduro took over pledging to ensure the legacy of “commander Chavez, the eternal father.”
However, when the oil prices sunk globally, every vulnerability that the Venezuelan economy had, simply burst. Chavez was keen on the nationalisation of foreign-owned businesses and expropriation of their assets at a time when almost everyone else was competing instead to attract Foreign Direct Investments. It’s not clear how efficiently Venezuela ran these nationalised assets and companies. At any rate, nothing can substitute good economic policy, which must include resolute action to diversify and modernise the economy. Sound social security policies are surely needed. Yet, the priority must be jobs, not charity.
There are now various proposals to mediate the conflict. The previous regional mediation efforts have failed. Some suggest no mediation would work in the absence of threats to impose costs for intransigence and non-compliance. I beg to differ. Mediation can succeed as the whole country would benefit from cessation of hostilities and return to peaceful democratic politics. Given sensitivities regarding imperialist legacies in the region, a complete outsider supported by a Group of Friends of Venezuela could be of help. If accepted, the first objective should be to establish order and reach a political agreement. Then must come a serious nationally-owned effort to reform and reorganise the Venezuelan economy to make it more productive, diversified, open and resilient to shocks. Ultimately, the economy and politics need more reform and less ideological entrapments.
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