Maduro Embraces Capitalism and Venezuelan Emigres Are Returning
(Bloomberg) -- Versión en español
Carlos Viloria came home to Venezuela last month.
A 35-year-old lawyer, he’d had enough of 15-hour days and abusive bosses as a restaurant worker in Argentina for a year and a half, one of more than 5 million Venezuelans who’ve left over the past five years hoping to escape one of the world’s worst humanitarian catastrophes.
His return is also emblematic. “I’m going to find a job that pays in dollars,” he said.
After leading his country’s economy over a cliff, President Nicolas Maduro has brought it a certain measure of stability. By allowing dollars to flow freely and private enterprise to flourish in recent months, he seems to have breathed new life into his regime. He remains widely despised but emigration has begun to slow, people are returning and the government is enacting laws to tax dollar transactions and allow companies to issue debt in foreign currencies.
All are signs that, despite a triumphant world tour including a White House meeting with President Donald Trump, opposition leader Juan Guaido is further away from ousting Maduro than he was a year ago when he announced that plan and won wide international support.
Help From Allies
At the time, many wrote off Maduro. He had, after all, taken one of the region’s richest countries and run it into the ground through corruption and colossal mismanagement. Then a year ago, the U.S. smacked Maduro with sanctions on oil. His country took a big hit and many believed he couldn’t survive. But the doubters didn’t realize how much help he’d get from key allies to evade sanctions or how he’d adopt a version of Chinese-style state capitalism.
“The economies of the countries that have helped us are capitalist -- China, Turkey and India,” said David Paravisini, a lawmaker in Venezuela’s National Constituent Assembly associated with Maduro. “To get their aid, you need conditions of economic liberalism. That’s what China did to move forward. It’s what we have to do.”
The new approach includes secret talks Maduro has had with holders of some $60 billion in bonds, some of them American, offering to pair them up with a foreign drilling company that would be granted the rights to oil fields as a means of their recouping debt. Venezuela has the world’s largest known oil reserves and if this deal came to fruition, many investors could reap enormous profits.
Several who’ve met with Maduro recently say he’s more confident than they’ve seen him in a long time. They spoke on the condition of anonymity.
Elliott Abrams, the U.S. special envoy for Venezuela, disagrees. “Why is this happening?” he asked reporters on Thursday, referring to the dollarization and privatization. “Because their backs are against the wall.”
Over the past year, the U.S. dollar has become Venezuela’s unofficial currency, appearing in cafeteria menus and mom-and-pop shop windows blocks from the presidential palace. Across the capital, bodegas filled with French Champagne, vacuum-sealed salmon and Grana Padano Italian cheese appeared where bankrupt shops had once been. The bolivar, the official currency, has become worthless through years of hyperinflation.
“What we saw wasn’t a liberalization, but a permissiveness, and in some cases a legal framework that existed but wasn’t enforced,” said Tamara Herrera, chief economist at Caracas-based consultancy Sintesis Financiera. “The need arose because of progressively intensifying U.S. sanctions. The new decrees show the government’s fiscal hunger and punitive nature.”
Oil production, after plunging for nearly a decade, is finally stabilizing at about 800,000 barrels a day, stemming some of the economic hemorrhaging. This year’s projected contraction, while still stunning at 10%, is a far cry from the 35% a year ago and 65% in the past five years.
The country’s Constituent Assembly approved a value-added tax last month to reap benefit from the estimated 70% of all transactions this year set to occur in dollars. Until now, the government hadn’t collected VAT on the dollar sales, a lost opportunity to make up for a dramatic drop in revenue.
“We are doing this now because there are signs that point to a recovery of the economy,” said Jesus Faria, a socialist party lawmaker at the National Constituent Assembly. “But we have a highly speculative economy in which price fixers, especially merchants, take every opportunity to set and obtain extraordinary profits, and incentives for national production must be created through more efficient policies.”
This has meant an abrupt return to some statist socialism. Venezuela’s price-control agency said it inspected more than 1,900 stores in January. Commerce Minister Eneida Laya recently said 135 agents had been dispatched across the country to “end the speculative economy.” Scrutiny had declined in recent months. The government is watching closely again.
“They came last week to tell us to cut our profits to 30%, which we had to do, but it hurt our business,” said Maria Luisa Pereira, who sells flour, rice and condiments at Quinta Crespo market in western Caracas. “How can we survive on so little with hyperinflation? They hadn’t been here in months and now they threatened us to come two more times in February. We’re afraid.”
Meanwhile, fewer Venezuelans are leaving, according to two polling firms, Datanalisis and Delphos. In a December report from Datanalisis, those expressing a desire to leave the country fell to 38%, down 5 points from a year before.
Of those who’ve emigrated in the past five years, 17%, or about 1 million, have returned over the same period, the data show. Maduro’s government says it’s overseen the return of more than 17,000 since 2018 through the “Come back to the fatherland” plan.
The United Nations still projects that this year the number of emigrating Venezuelans will surpass the 6 million Syrians who’ve been driven from their homeland. There’s been an irony about the Venezuelan emigration that the government knows but doesn’t mention: those who leave send remittances in dollars and also reduce the numbers needing to be fed and housed.
Ecoanalitica, a research firm, says remittances have risen from $2.7 billion in 2018 to what it estimates will be $4 billion this year.
Luis Vicente Leon, head of Datanalisis, said that the emigration of Venezuelans has slowed recently not only because of new opportunities at home but because of new restrictions and xenophobic backlash abroad.
“The barriers in those countries are increasing dramatically and make exit more difficult, especially for those without visas or resources,” Leon said. “Also, with the dollarization, staying home seems to be less traumatic than emigrating.”
Viloria, the lawyer who’s just back from Buenos Aires, said he found life there hard.
“At the beginning, they required me to work too many hours, 15 hours a day sometimes, and they paid me much less than the minimum wage,” he said. “I couldn’t complain or I’d get fired. They made me stand for 10 hours straight, I only had 15 minutes to eat, and many times I had to eat standing.”
He rented a small room in an apartment he shared with two others. He also felt unwelcome often.
“Some of the Argentine managers were xenophobic,” he said. “Once they told a Venezuelan partner that he had come from Venezuela like a cockroach. In Venezuela we have water and electricity failures, but at least I live in my house. In Argentina, it’s true that I could walk around safely at night and there are a lot of cultural events, but I spent all my time working, often being mistreated, and the money wasn’t enough. I’m putting my hopes in dollarization.”
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