Venezuela: Food and Medicine Shortages are a Government Policy

Empty shelves are commonplace in Venezuela
Empty shelves are commonplace in Venezuela

( – Even with the collapse of the price of oil, Venezuela’s total export revenue this year will yield a similar amount to Peru’s total exports. Peru and Venezuela have the same population, and the world knows there are no food lines in Peru and no one is dying from a lack of medicines in that country.

Unfortunately, most reporting by the international press on Venezuela’s current crisis, while mentioning the Chavista regime’s mismanagement and corruption, also places the blame on the economic crisis that befell the country after oil prices collapsed in late 2014. These views are the product of the Venezuelan government’s continued success in hiding the true nature of the regime.

Venezuelan and multinational companies still operating in the country could easily supply all needs of the population in food and medicine if the government allowed them access to USD $7 billion in foreign exchange. Only ten years ago, Venezuela had some of the most modern supermarkets in the region and stores were overflowing with goods with an equivalent amount of foreign exchange allocated to these same companies.

Are Venezuelan Bond Holders the Only Culprits?

If the country has over USD $30 billion a year in foreign exchange income, what is causing the crisis? Evidently it is not a lack of funds. Moreover, food and medicine shortages began to appear in Venezuela in 2014, when the price of oil was still over $100 per barrel

Ricardo Hausmann, a highly respected Harvard professor who served as Venezuela’s Minister of Economic Planning two decades ago, has long mentioned one of the most frequently cited causes of the current economic crisis. For almost two years, Hausmann warned that Venezuela could not pay the service on its foreign debt and provide foreign exchange for the basic needs of its population at the same time.

In September 2014, Hausmann and fellow professor Miguel Angel Santos published a now famous article that explained in detail the hardships the Venezuelan population was facing due to shortages of basic goods as the government did not deliver on its promise to provide foreign exchange to private importers.

They explained the dilemma facing the government. Either pay the importers or pay the bondholders:

The moral calculus becomes a bit more intricate when you cannot make good on all of your commitments and have to decide which to honor and which to avoid. To date, under former President Hugo Chávez and his successor, Nicolás Maduro, Venezuela has opted to service its foreign bonds, many of which are held by well-connected wealthy Venezuelans.

While Hausmann and Santos exposed the twisted logic of Chávez and Maduro, they did not elaborate on the reasons for the Venezuelan government’s decision to starve its own people.

It is true that the reason for not defaulting is the mere identity of the holders of Venezuelan bonds. It is no secret that Chavistas, their cronies in banking, and self-defined “brokerage houses” hold the lion’s share of Venezuela’s outstanding foreign debt.

They have made billions, yes, billions of dollars, buying Venezuelan bonds at deep discounts, profiting enormously as — to everyone’s surprise — the army generals who control Venezuela’s finances keep strict punctuality in payments. But while this insider trading of Venezuelan bonds does explain the reasons for Venezuela’s reluctance to default, using the lion’s share of the country’s foreign exchange income to service the debt still does not fully explain the war-like rationing and shortages currently suffered by the Venezuelan people.

Maduro’s Government Does Not Want to End Shortages

With relatively little amounts of additional money — probably less than USD $2 billion — the government could easily improve the current dire conditions significantly. This will be the case particularly if it allows private companies to return to their traditional role as importers of basic goods, instead of concentrating food and medicine imports in the hands of corrupt government agencies.

Why, then, doesn’t the Maduro government try this solution? The answer is: they are not looking for a solution.

The Maduro government in Venezuela is probably the most unpopular government on planet earth. 80% of Venezuelans have a negative opinion of Mr. Maduro, and these poll numbers arise in a country where people generally fear telling the truth to pollsters, as everyone is scared of possible government reprisals. In order to stay in power, Maduro needs a cowed populace.

The brutal repression tactics used by the Venezuelan military against even timid attempts at public protest are new to Venezuela, but familiar to anyone who lived behind the Iron Curtain. Torture and savage beatings on the streets have been widely documented by international institutions such as Human Rights Watch.

In addition to brutal raw repression, the other tool used to keep a population cowed and obedient is food rationing. Again, since the days of Lenin, this has been a widely used method of political repression in communist countries. If you are caught protesting, you lose your ration, your place in line, the milk for your children, the medicine for your mother.

Moreover, this is an effective method to keep the security forces on your side. If a police sergeant is lenient towards a protester, he loses the special privileges that allow his family to shop in special government shops, where food and medicine are plentiful.

The Minister of Food Supply in Venezuela is an army General who, until recently, served as Finance Minister. Army officers also control the supply of medicines and even raw materials for industry. Why have they not been fired in the face of the severe shortages of every kind? The answer is that they hold their posts with the purpose of ensuring the shortages do occur!

The International Press Has Been Conned

The foreign press has made the mistake of believing that the Chavista regime was at one point legitimate. They have failed to understand its true totalitarian nature, in part due to the mediocrity of the opposition leadership headed by Henrique Capriles, whose conciliatory stance has in the past helped to legitimize a regime born from stolen elections.

The current Venezuelan crisis has nothing to do with the price of oil. Food rationing began in Venezuela in 2014, when oil sold for over USD $100 per barrel. It also has nothing to do with Venezuela’s debt obligations. What the world is witnessing is what Chavez called “21st Century Socialism,” a communist totalitarian state designed to look like something else.

This is the first communist revolution designed for today’s consumers of mass media. Lenin would be so proud!