Americas
6:00 am
Mon October 7, 2013

Deja Vu Venezuela: How Rotted Is The Revolution?

U.S. dollars and Venezuelan bolivares being exchanged in Caracas.

Anyone who’s traveled to Caracas in the past few years knows the drill. As soon as you clear customs, you scan the airport terminal for the guys in trench coats.

They’ve got the good stuff: bolívares, the Venezuelan currency, which they exchange for your dollars at the black market rate. That means what the bolívar is actually worth -- about six times less than the laughably overvalued official rate of 6.3 to the dollar.

That more delusional official rate has long been the Venezuelan government’s way of trying to control its currency chaos. Even though the South American nation has the world’s largest oil reserves, it’s so shamelessly dependent on oil revenue that it exports little else, and that creates economic distortions.

Currency Crisis

Meanwhile, the guys in the trench coats give you a hint of the potential abuses of the currency control system: Since the 20th century, corrupt Venezuelan officials and their cronies have exploited the artificial exchange rates for epic profit.

The most infamous example was the Recadi scandal of the 1980s. Corruptos illegally purchased, or simply embezzled, massive amounts of cheap dollars the government had supposedly set aside to help businesses import goods. The crooks then sold those dollars for bolívares at the higher real rate. The orgy of malfeasance amounted to a surreal $11 billion.

According to the three-volume Diccionario de la Corrupción en Venezuela published in 1992, “the Recadi case constitutes the ultimate expression of modern Venezuela’s moral degradation.”

And analysts fear that’s exactly the sort of thing that may be happening now under current President Nicolás Maduro. If so, it would be one of the most brazen instances of hypocrisy in Latin American history.

Economic Corruption

The economic mismanagement of Venezuela’s socialist revolution -- established by the late President Hugo Chávez in 1999 and now continued by his hand-picked successor, Maduro -- has led not only to a currency crisis but to skyrocketing inflation and a shrinking private sector. The country as a result is experiencing chronic shortages of basic goods like eggs and toilet paper. To stimulate imports, the central bank has supposedly (there’s that word again) been channeling almost a billion cheaper dollars to select Venezuelan business sectors. 

The only problem: those industries, according to a Reuters report this week, say little if any of that money has actually gotten to them. It might have been diverted to shadowy shell companies, which the Maduro government blames on “right-wing speculators.”

But Venezuela watchers say it’s more likely, given the Chavista regime’s own well established reputation for corruption, that we’re watching Recadi redux.

Maduro seems to have sealed his image as inept, uninspiring and incapable of fixing the economic and social crises, including South America’s worst violent crime.

“Considering this is money controlled by the state,” says Javier Corrales, a Venezuelan politics expert at Amherst College in Massachusetts, “you have to wonder where else the money could have gone to. Government cronies and members of the ruling party are pretty strong suspects.”

Chávez toppled Venezuela’s venal 20th-century elite in the 1998 election by decrying its kleptomania and incompetence. But now, the misplacement of a billion bucks is a reflection of his revolution’s kleptomania and incompetence.

Maduro certainly knows how hypocritical that looks, which is why he’s so determined to make Venezuelans and the rest of the world look the other way. Hence his nutty diversion tactics of late, from canceling his trip to the U.N. General Assembly in New York last month because of imagined assassination threats, to this week’s expulsion of the charge d’affaires and two other diplomats from the U.S. embassy in Caracas.

Yet given the general feeling that Venezuela is collapsing in so many ways, it will be hard to deflect attention from a Recadi repeat if that is indeed what’s unfolding. Six months after just barely winning last April’s special election to succeed Chávez, who died in March, Maduro seems to have sealed his image as inept, uninspiring and incapable of fixing the economic and social crises, including South America’s worst violent crime. 

That didn’t stop him from playing another goofy scapegoat card this week: His government is threatening to fine a television network for “creating public anxiety” because it reported on Venezuela’s product shortages.

Qué lástima. What a shame. Chávez’s revolution used to be known for reducing Venezuela’s inexcusable poverty. Now the revolution is best known for its inexcusable poverty of credibility.