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1. Hyperinflation in Venezuela: A Stabilization Handbook

Author:
Gonzalo Huertas
Publication Date:
09-2019
Content Type:
Policy Brief
Institution:
Peterson Institute for International Economics
Abstract:
The unrelenting surge in prices in Venezuela has crippled the economy and deepened the humanitarian crisis there. Huertas lays out a feasible stabilization plan to stop Venezuela’s hyperinflation. The extent of the humanitarian crisis and shortage of basic goods and services suggests that, on the fiscal side, a stabilization plan should focus primarily on reallocating rather than reducing spending. The authorities should avoid austerity policies and instead spend on taking care of the Venezuelan people. Stabilizing the price level while providing relief to the country’s population would require significant financial assistance from the rest of the world, so it is critical that Venezuela secure strong financial support from the international community. Successful stabilization requires a credible plan to transition to a responsible fiscal policy, the financial resources to carry it out, and the political will to sustain it.
Topic:
Security, Economics, Finance, Inflation, and Humanitarian Crisis
Political Geography:
South America and Venezuela

2. Living with the Neighbors: The Effect of Venezuelan Forced Migration on Wages in Colombia

Author:
Leonardo Peñaloza Pacheco
Publication Date:
07-2019
Content Type:
Working Paper
Institution:
Center for Distributive, Labor and Social Studies (CEDLAS)
Abstract:
The aim of this paper is to estimate the causal effect of the migration of Venezuelans to Colombia on the Colombian real wage, since 2016. In the second semester of 2016, the borders between Colombia and Venezuela were reopened after a year of being closed due to a political crisis between the two countries; this re-opening is exploited as an identification strategy. Using data from the Unidad Administrativa Especial de Migraci´on Colombia and the Registro Administrativo de Migrantes Venezolanos in Colombia, it is estimated that the migratory flow of Venezuelans to Colombia increased the Economically Active Population of the border areas of La Guajira and Norte de Santander by approximately 10% and 15%, since its reopening. Differences-in-differences methodology and Synthetic Control Method are implemented and the results show that the increase in labor supply in these regions that resulted from the migratory flow generated a decline in real hourly wages of approximately 6%-9% on average. This decrease in real wages appears to be greater for men as compared to women. There is also evidence of a greater drop in real wages among people with lower levels of qualification and in conditions of informal employment.
Topic:
Economics, Migration, Political Economy, Labor Issues, Employment, and Income Inequality
Political Geography:
Colombia, Latin America, and Venezuela

3. The ebbing of the Pink Tide or permanent underdevelopment? Dependency theory meets uneven and combined development

Author:
Felipe Antunes de Oliveira
Publication Date:
05-2018
Content Type:
Working Paper
Institution:
Centre for Global Political Economy, University of Sussex
Abstract:
Latin America is once again passing through a crisis. After initially showing promising results, the neodevelopmentalist strategy adopted in Brazil and Argentina has reached its limits. The attempt at 21st century socialism in Venezuela derailed, tearing the country apart. Finally, the neoliberal path dutifully followed by Mexico, Chile, Colombia and smaller countries perpetuated social inequalities, and is now menaced by President Trump's protectionist turn. The current Latin American crisis goes much beyond the reversion of the so-called "Pink Tide". It affects all ideological colours, raising again an old theoretical-political question that stood in the core of dependency theory: is development even possible in Latin America? The key to answer this question – a concept of development that captures non-converging transformation – was not available to Frank, Marini, Bambirra and Dos Santos, among other dependency theorists. Too easily conflating development with catching-up, they reached a dead end. Indeed, as they could see, Latin America was constantly changing, but not in the expected ways. In this paper, I suggest that the concept of uneven and combined development allows for a renewed engagement with dependency theory's core problem, by representing mixed forms of development as the norm, not the exception.
Topic:
Debt, Development, Economics, International Development, and Economic growth
Political Geography:
Brazil, Colombia, Latin America, Venezuela, Mexico, and Chile

4. Amérique latine - L’année politique 2017

Author:
Javier Corrales, Olivier Dabène, Gaspard Estrada, Antoine Faure, Erica Guevara, Marie-Esther Lacuisse, Damien Larrouqué, Nordin Lazreg, Frédéric Louault, Antoine Maillet, Frédéric Massé, and Luis Rivera Vélez
Publication Date:
01-2018
Content Type:
Special Report
Institution:
Centre d'Etudes et de Recherches Internationales
Abstract:
Amérique latine - L’Année politique is a publication by CERI-Sciences Po’s Political Observatory of Latin America and the Caribbean (OPALC). The study extends the work presented on the Observatory’s website (www.sciencespo.fr/opalc) by offering tools for understanding a continent that is in the grip of deep transformations.
Topic:
Corruption, Crime, Democratization, Economics, International Trade and Finance, Sovereignty, Peacekeeping, Protests, Political Science, Regional Integration, Transnational Actors, and Borders
Political Geography:
Brazil, Argentina, Colombia, Latin America, Nicaragua, Caribbean, Haiti, Venezuela, Dominican Republic, Mexico, Jamaica, Costa Rica, Chile, Peru, Paraguay, and Bolivia

5. REGIME EFFECTIVENESS AND DEMOCRACY PROTECTION: THE RESPONSES OF MERCOSUR TO THE IMPEACHMENT PROCESSES IN PARAGUAY AND BRAZIL

Author:
Alexandre San Martim Portes
Publication Date:
04-2017
Content Type:
Journal Article
Journal:
Conjuntura Austral: Journal of the Global South
Institution:
Conjuntura Austral: Journal of the Global South
Abstract:
Democratization and regional integration are phenomena relatively new in South America. After decades of authoritarian regimes, new democratic orders and globalization brought the necessity of looking for partnership in the neighborhood. The Common Market of the South, or in the Spanish acronym Mercosur, was created in 1991, as an attempt to bring the countries in the region not only economically but also politically closer. Although initially a project lead by Brazil and Argentina, Mercosur has today threemore members: Paraguay, Uruguay, and Venezuela. Bolivia is in the process of integration and Chile, Peru, Colombia, Ecuador, Guyana and Surinam are associate members (MERCOSUR, 2017).
Topic:
Economics, International Political Economy, and Common Market
Political Geography:
Brazil, Argentina, South America, Uruguay, Latin America, Venezuela, and Paraguay

6. Amérique latine - L’année politique 2016

Author:
Maya Collombon, Jacinto Cuvi, Olivier Dabène, Gaspard Estrada, Antoine Faure, Erica Guevara, Damien Larrouqué, Frédéric Louault, Antoine Maillet, Frédéric Massé, Kevin Parthenay, Eduardo Rios, and Darío Rodriguez
Publication Date:
01-2017
Content Type:
Special Report
Institution:
Centre d'Etudes et de Recherches Internationales
Abstract:
Amérique latine - L’Année politique is a publication by CERI-Sciences Po’s Political Observatory of Latin America and the Caribbean (OPALC). The study extends the work presented on the Observatory’s website (www.sciencespo.fr/opalc) by offering tools for understanding a continent that is in the grip of deep transformations.
Topic:
Economics, History, Sociology, State Violence, and Political Science
Political Geography:
Brazil, Argentina, Colombia, Latin America, Nicaragua, Caribbean, Venezuela, Mexico, Chile, and Ecuador

7. Revisiting the Issue of Democratic Deterioration in Venezuela, 1974–1998

Author:
Anibal F. Gauna
Publication Date:
01-2017
Content Type:
Journal Article
Institution:
German Institute of Global and Area Studies
Abstract:
This article examines the issue of democratic deterioration by revisiting the Venezuelan case (1974–1998). Using sequence elaboration and alternative case-focused theories, it tests and confirms the hypothesis that presidential partyarchy was the main contextual explanatory factor behind the crisis that led to Venezuela’s democratic deterioration. Building on elite conflict theory, it also aims to integrate previous studies’ insights and better explain the timing of factors to illustrate how economic presidentialism (the highly autonomous executive control of a state-controlled economy) was the main mechanism leading to democratic deterioration.
Topic:
Economics, Authoritarianism, Democracy, and State-Owned Enterprises
Political Geography:
South America, Latin America, and Venezuela

8. Weathering Collapse: An Assessment of the Financial and Operational Situation of the Venezuelan Oil Industry

Author:
Roberto Hernández Hernández and Francisco J. Monaldi
Publication Date:
11-2016
Content Type:
Working Paper
Institution:
The John F. Kennedy School of Government at Harvard University
Abstract:
Venezuela has one of the most abundant geological endowments in the world. Oil proven reserves are among the largest globally, even if a more conservative criterion than the one used by the current government is applied. However, these resources are qualitatively different than those of other abundant regions such as the Middle East. The large majority constitutes extra-heavy oil, which generally requires higher oil prices to be extracted profitably. During the last decade, the Venezuelan oil industry wasted a unique opportunity to increase investment and production. At the high oil prices that prevailed, the massive oil reserves could have been monetized by rapidly increasing production with a large margin of profitability. Quite to the contrary, production steadily dropped due either to lack of investment in the new unconventional oil projects or for failing to compensate the decline of the older conventional fields. It is a tragic story of great potential with dismal performance. A series of trends were negatively impacting the Venezuelan oil industry even before the oil price collapse in 2014. From the revenue side, although oil prices showed an increase in real terms of 120% between 2000 and 2014, the barrels that effectively generate cash for Venezuela have shown a continuous decline. This is not just because production has been declining for the most part during the last eighteen years (a trend that has gotten significantly worse during the last year), but also because of a number of developments. First, during that period, total exports have declined more rapidly than production, and recently, net exports have declined more than total exports. Consumption in the massively subsidized domestic market increased until 2013 (when it started to decline likely because of the recession in the local economy), while imports of oil products for the domestic market have increased since 2012. The domestic market not only generates negative cash-flow for the national oil company (NOC), PDVSA, but also its expansion reduced the barrels available to export. More recently, there has also been an increase in imports of light oil and naphtha as diluents for the extra-heavy oil. Second, the Venezuelan production basket has become heavier and the share of unconventional production, generally less profitable, has increased. Third, the production wholly operated by PDVSA has been falling much more rapidly, while the production share of joint-ventures increased. Fourth, a significant share of the exports to Latin America and the Caribbean is subsidized (although these exports have declined recently). Fifth, some oil exports are committed to repay debts of PDVSA and specially the Venezuelan government, limiting the actual cash flow received by the company. In particular, the government’s debt agreements with China involve a significant and increasing amount of production, although recently those agreements were restructured, allowing for a grace period with no capital amortization. From the expenditure side, PDVSA was increasingly responsible of carrying social expenditures and activities not related to the oil industry, which limited the resources for highly profitable investments. That is in addition to the increased fiscal take due to changes in the tax legislation. Also, higher investment requirements due to an increase in the equity share of PDVSA in joint venture projects, has had an impact on its cash flow. The explanations for the underperformance of the Venezuelan oil industry basically fall into two connected categories: the multiple problems facing PDVSA; and the increase in above-ground risks for foreign investors operating in the country. The deterioration of the institutional framework, led to radical fiscal and regulatory changes, and to the nationalization of the majority of the industry. In addition, the substantial over-extraction of resources from the NOC, the significant macroeconomic distortions affecting the cost structure of oil companies, and the constraints imposed by the energy infrastructure and human capital availability; have combined to produce dismal results. The massive firing of the majority of the management and technical experts from PDVSA in 2003 following the political conflict that led to a strike, has left the company with limited capabilities to operate effectively. The recent decline in oil prices, and the changes in the international market structure, have exposed more dramatically the difficulties facing the Venezuelan oil sector, and call into question its ability to prevent a continuation of the declining trend in oil extraction. This situation becomes particularly severe if we take into account the cash flow constraints facing PDVSA, as well as its multiple operational problems, power cuts, and conflicts with oilfield services providers. These challenges are proportional to the enormous investments required to finance the projects in the Orinoco Oil Belt, where most of the reserves in Venezuela are located, and where the quality of the crude and the lack of development of the region, are just two of the many issues that need to be addressed. Since this paper is part of a wider project to understand the macroeconomic challenges facing the country in 2016-17, it focuses narrowly on the financial problems of the oil industry in the short-term and the operational challenges that could impede its recovery in the next couple of years. Within this context, it largely analyzes the upstream operations, i.e. oil extraction, rather than the downstream, given that in the former is where the oil rents are generated and constitutes the main source of foreign exchange and fiscal revenues of Venezuela. Other areas for further research are mentioned at the end of the document.2 Official figures are used to the extent that they are publicly available. An important aspect that prevents an exhaustive evaluation of the oil sector in Venezuela is the lack of available information regarding key performance indicators affecting the cost structure of oil projects, the cash flow of PDVSA, and the fiscal contributions of the oil sector to the government, among other important variables. Thus, on occasion, estimations for variables of interest and explanations for their divergence from official figures are provided. The paper has two main sections. The first one analyzes the issues affecting the cash flow of PDVSA, the effects of macroeconomic and fiscal variables on both revenues and costs, as well as other financial issues affecting the performance of the company. The second section discusses some of the operational challenges facing the industry and mentions areas for further research. 2 For a more general overview of the recent developments of the oil sector in Venezuela see Monaldi (2015)
Topic:
Economics, International Trade and Finance, Oil, and Natural Resources
Political Geography:
South America and Venezuela

9. Amérique latine - L’année politique 2015

Author:
Maya Collombon, Hélène Combes, Olivier Dabène, Gaspard Estrada, Marie-Laure Geoffray, Ana Carolina González Espinosa, Erica Guevara, Damien Larrouqué, Marilde Loiola de Menezes, Frédéric Louault, Frédéric Massé, Mohcine Mounjid, Eduardo Rios, and Darío Rodriguez
Publication Date:
12-2015
Content Type:
Special Report
Institution:
Centre d'Etudes et de Recherches Internationales
Abstract:
Amérique latine - L’Année politique is a publication by CERI-Sciences Po’s Political Observatory of Latin America and the Caribbean (OPALC). The study extends the work presented on the Observatory’s website (www.sciencespo.fr/opalc) by offering tools for understanding a continent that is in the grip of deep transformations.
Topic:
Political Violence, Economics, Regional Cooperation, Bilateral Relations, Sociology, and Elections
Political Geography:
Brazil, Argentina, Colombia, Cuba, Arab Countries, Latin America, Nicaragua, Caribbean, Venezuela, Mexico, and United States of America

10. Uncertain Energy: The Caribbean's Gamble with Venezuela

Author:
David L. Goldwyn and Cory R Gill
Publication Date:
07-2014
Content Type:
Working Paper
Institution:
Atlantic Council
Abstract:
It has been nearly ten years since the launch of Petrocaribe, a program designed to win the political loyalty of the Caribbean states through generous credit subsidies to help import Venezuelan crude oil and products. Recipient states have grown dependent on high-cost, high-carbon fuels for power generation and Venezuelan credit to balance their budgets.
Topic:
Economics, Energy Policy, International Trade and Finance, and Oil
Political Geography:
South America, Latin America, Caribbean, and Venezuela