Venezuela Gov’t Doubles Down on Policies Blamed for ‘Economic Disaster’

By Mark Browne | August 25, 2016 | 12:03am EDT
Venezuelan President Nicolas Maduro. (Photo: Venezuelan Presidency)

Mexico City ( – The administration of Venezuela’s socialist President Nicolas Maduro is doubling down on policies blamed by some for the country’s massive recession and widespread shortages of food and medicines, according to a Caracas business leader.

“The government has become more radical,” Victor Maldonado, executive director of the Chamber of Commerce, Industry and Services told by phone from Caracas.

Ministers who “were talking about allowing for more freedom in the economy” have been recently fired, he noted.

“If the current government maintains its economic policies, Venezuela will not exit its current crisis and the problems will only become greater,” Maldonado said.

According to the IMF, Venezuela’s economy is expected to shrink by 8 percent this year, with inflation ballooning to 700 percent.

In a dismal 2016 economic outlook for the country, the IMF cited “widespread price and other administrative controls and regulations” and a “worsening business climate.”

Maldonado predicted the current situation will likely get worse and could end up with a total collapse of the government and the economy, once Venezuela’s reserves are depleted and the government can no longer pay its debts or fund basic services.

Current reserves total $11.8 billion, down from $16.3 billion in January, Maldonado noted.

A financial expert on Venezuela’s debt told CNN earlier this month that the government will “run out of money within a year.”

“The root of Venezuela’s current problems are government controls on prices, labor and the foreign exchange rate,” Maldonado argued. “All of this has hurt productivity. If the government continues to exercise controls over the economy, the crisis will get worse.”

Citizens have gathered enough signatures to hold a referendum vote that could remove Maduro prior to the next presidential election in 2018.

But Maldonado said the government is working to slow down the recall effort at every step.

In spite of the economic and political crises, Venezuela has not reached the point where the government no longer has control, he said.

Maldonado predicted that social unrest would not likely result in change, given the degree of government repression.

Just back from a two-week visit to Caracas, Canadian economist Fred McMahon said the capital “looks more or less normal during the day except when you are close to a supermarket or drug store where you see lines that don’t seem to move.”

The city, however, was “shockingly deserted at night,” added McMahon, a resident fellow at the Fraser Institute in Canada.

McMahon traveled to Venezuela to meet with members of the business and labor communities and CEDICE, a Caracas think tank dedicated to individual liberty and free-market policies.

In a column published after his visit, he blamed Venezuela’s current economic crisis on “crony capitalists” and “crony socialists” who “detest free-markets.”

“Venezuelans are coming to understand the nature of the tragedy but the opposition is divided with little policy. The current regime cannot endure in its present form – food is running out and the military may already be in control,” McMahon wrote.

The people he talked to during meetings with business leaders “were very uncertain of the future,” McMahon said.

“I was dealing with a select part of the population that is more educated and more free-market, but they didn’t have any sense of what the future would hold.”

What surprised him most during his visit was labor leaders’ disillusionment with socialism: “The labor leaders seemed quite turned off by Bolivarian socialism.”

However, a preference among some Venezuelans for “authoritarian government,” could make it very difficult for the country to move to a fully free-market economy.

McMahon said he was particularly disappointed by a lack of a “free-market alternative plan” among opponents to the government, who seem more concerned with battling each other for power rather than proposing new policies.

While North Americans tend to blame Venezuela’s current economic problems on Maduro’s late predecessor, Hugo Chavez, McMahon disputed that.

“There was a steady decline in free market policies from 1970 to when Chavez took power [in 1998],” he said. “Under Chavez, it continued.”

Today, McMahon said, Venezuela is “an economic disaster.”

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