WASHINGTON – Venezuela and Norway offer virtually opposite outcomes in the management of oil wealth.
Norway’s 5.3 million citizens are now entitled to nearly $200,000 each, money that has accumulated from a $1 trillion fund the government carefully set aside and managed through the country’s massive oil and gas wealth. In Venezuela, Hugo Chávez was once in a position to be giving away hundreds of thousands of free cars and houses to his citizens. Today, Venezuelans are lucky to have enough food to eat.
On Tuesday, Raúl Gallegos, a journalist who covered Venezuela’s oil industry for Dow Jones and the Wall Street Journal, described how once-oil-rich Venezuela has been destroyed by corruption, wealth mismanagement and an addiction to spending.
Speaking at the Cato Institute, Gallegos relayed details from his book, How Oil Riches Ruined Venezuela, which offers a history of rulers bent on excessive spending.
“One of the things that needs to be done (in Venezuela) is to save the wealth, to invest it properly and responsively,” Gallegos said. “When you talk to most Venezuelans about this sort of proposal, they roll their eyes. They say, ‘Oh that’s impossible. We’re corrupt.’ That’s the answer. ‘We’re just corrupt.’”
Venezuela’s addiction to excess, according to Gallegos, dates back to the dictator Juan Vicente Gómez, who ruled the country for nearly 30 years in the early 1900s, a period in which he spent everything and saved nothing. Gallegos said that eventual President Marcos Pérez Jiménez cemented the idea that spending in large amounts was the proper path, that oil largesse was something Venezuelans should expect.
Jiménez was known for spearheading costly infrastructure projects, most notably a 10.5-mile freeway connecting Caracas to an airport on the coast, which cost $53 million per mile (in 2015 dollars) to make. The military eventually turned on Jiménez, but his legacy was something that future Venezuelan presidents would carry forward.
The 1970s saw an oil embargo that flooded exorbitant amounts of wealth into Venezuela, a time period when people referred to the country as Saudi-Venezuela and Concorde jets were making regular routes from Paris to Caracas. According to Gallegos, when President Carlos Andrés Pérez came into power in the mid-1970s, he promised to manage this abundance with a “mentality of scarcity.” That proved to be a lie, and like his predecessors, he “spent like a drunken sailor,” according to Gallegos.
Though Venezuela’s economy was compared to West Germany, the country would have no wealth to show for it by the end of the 1970s, when the onset of a “hangover of excess” began. President Luis Herrera Campins in the 1980s oversaw the largest currency devaluation in the country’s history, and President Carlos Andrés Pérez watched massive rioting unfold in an event known as Caracazo, which saw as many as 300 people die in a matter of weeks.
The 1990s saw leaders steer the country through a massive banking crisis before Hugo Chávez came to power in 1999 and served until 2013. Venezuela reported about $1.4 trillion in oil revenue during Chávez’s tenure, but much of it was “spirited away through corruption and waste,” Gallegos said.
Worse than the shortage of proper wealth management, Gallegos said that the country has an even greater shortage of democratic values. Now under the leadership of Nicolás Maduro, Gallegos said that Venezuela refuses to admit it has an addiction, and like an addict, it refuses to seek treatment.
Gallegos said the most likely outcome is “Maduro will continue to drive that bus off the cliff, and I’m afraid that we are due for some more pain before the situation improves any time soon.”