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Oil Has Cursed Venezuela

General discussions of the systemic, societal and civilisational effects of depletion.

Oil Has Cursed Venezuela

Unread postby AdamB » Sat 16 Dec 2017, 12:46:27

Most Venezuelans have a love-hate relationship with oil. I personally was never one of the haters—I was one of the lovers. When I was very young, I would go after school to my mother’s office at Meneven, a subsidiary of Venezuela’s state-owned oil company, where I was fascinated by the processes of production and refinement, as well as the economics of the industry. When I was 16, I toured the massive oil fields of Zulia State, about a day’s drive from my hometown of Caracas. It was then that I realized that the country’s massive wealth potential was at odds with the widespread poverty that was all around me. I was too young to know anything about resource curses, the all-too-frequent phenomenon in which a country’s natural-resource wealth feeds economic distortions and inequality. But you didn’t have to be an academic


Oil Has Cursed Venezuela
Peak oil in 2020: And here is why: https://www.youtube.com/watch?v=2b3ttqYDwF0
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Re: Oil Has Cursed Venezuela

Unread postby AdamB » Sat 16 Dec 2017, 12:46:57

Oil hasn't cursed Venezuela. Really stupid decisions have.
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Re: Oil Has Cursed Venezuela

Unread postby pstarr » Sat 16 Dec 2017, 12:58:11

The resource curse, also known as the paradox of plenty, refers to the paradox that countries with an abundance of natural resources (like fossil fuels and certain minerals), tend to have less economic growth, less democracy, and worse development outcomes than countries with fewer natural resources. There are many theories and much academic debate about the reasons for and exceptions to these adverse outcomes. Most experts believe the resource curse is not universal or inevitable, but affects certain types of countries or regions under certain conditions.[1][2]

We've seen the same right here in the United States. For many years the South was the cotton and wood plantation for the rest of the country. It's only now finally throwing off its 3rd World yolk. I have seen the same here in the Pacific Northwest, the last great Tree Kingdom in the lower 48.
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Re: Oil Has Cursed Venezuela

Unread postby Shaved Monkey » Tue 19 Dec 2017, 15:31:29

Norway and its people do ok from their resources
The Ivory Coast doesnt
Singapore has no resources but provides a low tax shelter to vacuum up lots of the profits from Australias resources
Japan and Germany had very little natural resources and did ok through manufacturing high end products
Switzerland had milk and made chocolate,makes a watches with lots of skill and marketing and minimal metal and harvested money through its secret banks

Its a lot harder when your country only has one commodity and has to fight an economic war too.
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Re: Oil Has Cursed Venezuela

Unread postby pstarr » Tue 19 Dec 2017, 15:43:55

Shaved Monkey wrote:Norway and its people do ok from their resources
The Ivory Coast doesnt
Singapore has no resources but provides a low tax shelter to vacuum up lots of the profits from Australias resources
Japan and Germany had very little natural resources and did ok through manufacturing high end products
Switzerland had milk and made chocolate,makes a watches with lots of skill and marketing and minimal metal and harvested money through its secret banks

Its a lot harder when your country only has one commodity and has to fight an economic war too.

So you want to blame Chavez and creeping communism. You know that many of the sucessfull examples you posted are also socialist countries?

I'd rather believe that Venezuala is pitiful and sad state is a consequence of its own peak oil. And too many poor people, income disparity and a century of US meddling.
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Re: Oil Has Cursed Venezuela

Unread postby Shaved Monkey » Tue 19 Dec 2017, 15:48:17

pstarr wrote:
Shaved Monkey wrote:Norway and its people do ok from their resources
The Ivory Coast doesnt
Singapore has no resources but provides a low tax shelter to vacuum up lots of the profits from Australias resources
Japan and Germany had very little natural resources and did ok through manufacturing high end products
Switzerland had milk and made chocolate,makes a watches with lots of skill and marketing and minimal metal and harvested money through its secret banks

Its a lot harder when your country only has one commodity and has to fight an economic war too.

So you want to blame Chavez and creeping communism. You know that many of the sucessfull examples you posted are also socialist countries?

I'd rather believe that Venezuala is pitiful and sad state is a consequence of its own peak oil. And too many poor people, income disparity and a century of US meddling.

check out the last line in my bit

Im not blaming Chavez
Or state ownership of resources ,Im all for that.
Australia lost 2 prime ministers who tried to do that here.

Cheap oil prices were used as a weapon to try and destroy Venezuela and Russia
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Re: Oil Has Cursed Venezuela

Unread postby Cog » Tue 19 Dec 2017, 16:58:45

In this thread we discover the true lovers of Marxism/Leninism. Not that there were huge surprises.
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Re: Oil Has Cursed Venezuela

Unread postby Plantagenet » Tue 19 Dec 2017, 18:40:00

Shaved Monkey wrote:Norway and its people do ok from their resources
The Ivory Coast doesnt


The people of Norway are cultured and well educated and the government is reasonably honest. They've managed their oil wealth very very well. Congrats to them!

The people of Ivory Coast and Venezuela are not so well educated and the governments they put in power are both corrupt and tilt to the far left---a highly destructive combination. These two countries haven't managed their oil wealth well at all.

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Re: Oil Has Cursed Venezuela

Unread postby onlooker » Tue 19 Dec 2017, 19:08:45

How is this for the reason for the curse. The stronger say to the weaker, we want what you got. Then they go about getting it via artifice, coercion, bribery or outright force. And it helps tremendously when you have a worldwide system that facilitates this. See IMF, WORLD BANK, SAP Programs, WTO. Or better yet read "The Case Against the Global Economy: And for a Turn Towards Localization"
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Re: Oil Has Cursed Venezuela

Unread postby Plantagenet » Tue 19 Dec 2017, 19:26:32

onlooker wrote:How is this for the reason for the curse. The stronger say to the weaker, we want what you got. Then they go about getting it via artifice, coercion, bribery or outright force.


Yup. Thats exactly how Venezuela nationalized the oil industry---they sent in troops and seized it.

But the joke is on the socialists.

Evert since Venezuela nationalized their oil industry, the money for upkeep of equipment and production maintanance has been diverted into crackpot schemes to prop up the Cuban communist regime and other wackiness instead of maintaining their oil production, and the oil industry and then the overall economy in Venezuela has gone to heck.

The data is pretty clear---Oil production in Venezuela has rapidly collapsed since the socialists nationalized the oil industry

venezuela-crude-output-hits-28-year-low-


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Re: Oil Has Cursed Venezuela

Unread postby pstarr » Tue 19 Dec 2017, 19:31:18

Shaved Monkey wrote:
pstarr wrote:
Shaved Monkey wrote:Norway and its people do ok from their resources
The Ivory Coast doesnt
Singapore has no resources but provides a low tax shelter to vacuum up lots of the profits from Australias resources
Japan and Germany had very little natural resources and did ok through manufacturing high end products
Switzerland had milk and made chocolate,makes a watches with lots of skill and marketing and minimal metal and harvested money through its secret banks

Its a lot harder when your country only has one commodity and has to fight an economic war too.

So you want to blame Chavez and creeping communism. You know that many of the sucessfull examples you posted are also socialist countries?

I'd rather believe that Venezuala is pitiful and sad state is a consequence of its own peak oil. And too many poor people, income disparity and a century of US meddling.

check out the last line in my bit

Im not blaming Chavez
Or state ownership of resources ,Im all for that.
Australia lost 2 prime ministers who tried to do that here.

Cheap oil prices were used as a weapon to try and destroy Venezuela and Russia

Sorry guy, I jumped the gun. That was the deal Reagan made with the Saudia's. Came back to bite use with three decades of Saudi financed Wahabanism and terror.
Not too bright, huh?
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Re: Oil Has Cursed Venezuela

Unread postby kublikhan » Tue 19 Dec 2017, 22:19:00

Here's a few articles on Venezuela's collapse that should be a bit more palatable to our socialist posters without going full bore "It was all the fault of the US and international bankers!"

What’s Behind The Economic Chaos In Venezuela

As socialist Venezuela collapses, socialist Bolivia thrives. Here’s why.

The Venezuelan governments mismanaged the county by epic proportions. This is not a dig at socialism per se. Many other socialist leaning countries are doing much better. It was the leaders themselves. Part of the problem goes much further back than Chavez. Ever since it started producing oil, Venezuela has always been a country that spends every penny it brings in and then some. Even in the boom times Venezuela was running a deficit. Contrast this with socialist leaning Bolivia that was paying down debt and building up reserves during it's commodity boom. Then when the oil boom turned to bust and all those oil revenues dried up, Venezuela had no rainy day fund to cushion it's blow. Lack of diversification is a big problem too. You don't want one commodity making up 95% of your exports while nearly everything else is imported.

But that is only part of the problem. New problems were added by Chavez and Maduro. In 2003 Chavez fired 19,000 employees of PDVSA (Venezuela's oil company) and replaced them with politically loyal yet inexperienced employees. This lead to a large brain drain in the oil sector and left it with a void of qualified personnel. This problem was exacerbated in 2007 when Chavez expropriated many foreign oil investments. This gave Venezuela a short term boost to it's income(by stealing the foreign investments in the country) but it hurt their oil sector in the long term. A further harsh blow to the industry was Chavez diverting funds that should have been used to invest in new oil sector projects to fund his social programs. Using oil wealth to fund social programs is a great idea but you have to do it in a smart way(ex: Norway). But Chavez went too far and starved the oil industry of the funds it needed to survive. Oil is a capital intensive business. You need to put the bucks in to get the bucks out. But Chavez was starving his golden goose and it was slowly dying. Robert Rapier does a good job of explaining this part of the saga here. The consequences of this were delayed during Chavez's term by high oil prices. The huge increase in oil prices more than made up for falling oil production. But then the Maduro administration got hit with the doubly whammy of falling prices and falling production. Even if oil prices recover the industry has been badly damaged by more than a decade of diverted funds, brain drain, mismanagement, expropriations, etc.

In addition to mismanaging the oil sector, Chavez also mismanaged the general economy as well:
The third factor, which is probably the most significant at this stage to explain why the crisis is so deep, is the currency controls — which were implemented in 2003 after an oil industry strike aimed at ousting Chávez. Currency controls are usually a measure that you take for a year or two at the most, because after that, it creates an incentive for corruption, and that’s exactly what has happened. It created disincentives for production, and incentives for purchasing, hoarding and then reselling the scarce goods that there are.
What’s Behind The Economic Chaos In Venezuela

In addition to currency controls, Chavez and Maduro also introduced price controls that proved disastrous for the economy:
The main culprit in Venezuela’s economic tragedy is government intervention, specifically price controls implemented during the Chávez and Maduro administrations. These controls have been the underlying factors behind the rampant scarcity of basic goods in Venezuela.

Venezuela’s Current Price Control Experiment
Emboldened after an unsuccessful coup attempt against his government in 2002, Hugo Chávez initiated a series of interventionist measures with the aim of preventing capital flight. These measures included expropriation of key industries, exchange controls, and price controls.

Despite the harmful nature of these policies, the flow of petrodollars thanks to high oil prices could give Venezuelan businesses the luxury of importing basic goods and raw materials as a short-term, fallback measure. Even with high oil prices, shortages of price controlled goods began to slowly pop up in 2006 due to the exchange and price controls.

When oil prices started to fall, harsh economic realities began to surface. Scarcity would soon become a nationwide phenomenon in Venezuela thanks to the combined effects of stringent exchange controls that did not allow for the free entry of dollars and a price control regime that prevents the price system from functioning in the economy.

With high levels of inflation coming into the mix, Venezuela’s socialist government would strengthen its price controls. Through its passage of the Fair Prices Act in 2014, the Venezuelan government aimed to tame shortages by banning profit margins over 30 percent and tightening price ceilings on basic goods.

The aforementioned law has only aggravated Venezuela’s shortage crisis and has put the country on the road to famine. In heavy-handed fashion, the government continued its interventionist policies with the establishment of CLAPS, local supply and production committees, that only ration food to government supporters. These measures will result in further misery and poverty, as the government and its supporters will be the only beneficiaries of such policies.
Price Controls Are Disastrous for Venezuela, and Everywhere Else

The policies implemented by the Chavez and Maduro administrations encouraged people to make money not buy providing goods and services but instead via corruption, smuggling, black marketeering, etc. This has resulted in an economy that imports nearly everything during good times and falls apart during bad times.
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Re: Oil Has Cursed Venezuela

Unread postby onlooker » Wed 20 Dec 2017, 02:36:54

http://www.mintpressnews.com/us-led-eco ... rt/218335/
How about a more balanced perspective of what has been happening there
In reality, millions of Venezuelans have seen their living conditions vastly improved through the Bolivarian process. The problems plaguing the Venezuelan economy are not due to some inherent fault in socialism, but to artificially low oil prices and sabotage by forces hostile to the revolution.

Starting in 2014, the Kingdom of Saudi Arabia flooded the market with cheap oil. This is not a mere business decision, but a calculated move coordinated with U.S. and Israeli foreign policy goals. Despite not just losing money, but even falling deep into debt, the Saudi monarchy continues to expand its oil production apparatus. The result has been driving the price of oil down from $110 per barrel, to $28 in the early months of this year. The goal is to weaken these opponents of Wall Street, London, and Tel Aviv, whose economies are centered around oil and natural gas exports.

And Venezuela is one of those countries. Saudi efforts to drive down oil prices have drastically reduced Venezuela’s state budget and led to enormous consequences for the Venezuelan economy.

At the same time, private food processing and importing corporations have launched a coordinated campaign of sabotage. This, coupled with the weakening of a vitally important state sector of the economy, has resulted in inflation and food shortages. The artificially low oil prices have left the Venezuelan state cash-starved, prompting a crisis in the funding of the social programs that were key to strengthening the United Socialist Party.
Corruption is a big problem in Venezuela and many third-world countries. This was true prior to the Bolivarian process, as well as after Hugo Chavez launched his massive economic reforms. In situations of extreme poverty, people learn to take care of each other. People who work in government are almost expected to use their position to take care of their friends and family. Corruption is a big problem under any system, but it is much easier to tolerate in conditions of greater abundance. The problem has been magnified in Venezuela due to the drop in state revenue caused by the low oil prices and sabotage from food importers.
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Re: Oil Has Cursed Venezuela

Unread postby Tanada » Wed 20 Dec 2017, 09:58:45

What a steamy pile of BS you found Onlooker. If VZ had been a properly functioning country like say France, which is a very socialist country in organization, then the loss of half the oil revenue would have been unpleasant but no more than that. VZ has massive resources for farming and fishing, it does not have to depend solely on oil to operate its economy. However the leadership of the country did a lousy job of promoting or installing diversified economic systems artificially making the country totally dependent on oil prices. Even worse 12 years ago oil prices had never held as high as they are today and yet VZ muddled along in 1990-2005 with few visible issues and no mass privation taking place. The fact that the wheels came off the VZ economy so quickly when oil prices dropped in 2015 into first quarter 2016 is a sign of terrible management, not the particular failing of the government system per se, but the people operating it at the time.

Let me be clear here, I am not sold on the idea that socialistic governments are so wonderful compared to more Lassie-fare systems with less federal control, but I freely acknowledge that those types of governments have done quite well in France, the Netherlands, Denmark and Scandinavia. In some other countries with very nearly the same system of governance they have done much less well when it comes to things like energy policy, but this thread is specifically about VZ, which is one of those less well run countries.
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Re: Oil Has Cursed Venezuela

Unread postby Ibon » Wed 20 Dec 2017, 12:06:07

Onlooker, compara tu pais de origin, Colombia, con Venezuela. Colombia por gran parte ha superado sus problemas politico y hoy la economia esta creciendo, hay mucho turismo, hay un optimismo en el pueblo colombiano como no hemos visto durante mucho tiempo.

En cambio Venezuela esta jodido por incompetencia politico, por razones internos, no por culpa del imperialismo del norte.......
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Re: Oil Has Cursed Venezuela

Unread postby Plantagenet » Wed 20 Dec 2017, 12:15:49

"In addition to mismanaging the oil sector, Chavez also mismanaged the general economy as well"

Thats one of the fundamental problems with a highly centralized socialist-style economy.

Once an incompetent ideologue becomes the leader, he can screw up the entire economy big time. And there is no way to improve things as long as the leadership and its stupid economic policies stay the same so wages tend downward and poverty and food shortages and housing shortages etc. etc. just get worse and worse over the years.

In contrast, capitalist economies are much more decentralized and diverse. Its much more difficult for one person's bad decisions to screw everything up, and even when things do screw up there is still hope of political, economic and cultural "change" when new people take over.

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Re: Oil Has Cursed Venezuela

Unread postby KaiserJeep » Wed 20 Dec 2017, 12:51:17

The only quibble I have with the above analysis is the statement that France, the Netherlands, Denmark, Scandinavia, etc. are thriving Socialist "economies". Those countries in fact are thriving and highly competitive Capitalist economies. The "Socialist" programs you refer to are those government policies that provide pensions, healthcare, assistance for the poor, and the like - nothing related to the highly competitive business environment. Nor do the governments of those "Socialist" countries own the resources or means of production. These countries differ mainly from the USA, the UK, Canada, etc. in that an extremely high level of taxation is tolerated by the populace. Venezuela did not tax energy and industry, it nationalized these corporations and then mismanaged them.

Do bother to distinguish social programs from economic programs, and outright theft from taxation.
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Re: Oil Has Cursed Venezuela

Unread postby GHung » Wed 20 Dec 2017, 13:24:33

KJ said; "Do bother to distinguish social programs from economic programs, and outright theft from taxation."


Do explain how 'social programs' and overall economic programs have been/can be divorced from each other, and how you derive no benefits from taxation.
This should be enlightening.
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Re: Oil Has Cursed Venezuela

Unread postby Plantagenet » Wed 20 Dec 2017, 13:46:40

GHung wrote:explain how 'social programs' and overall economic programs have been/can be divorced from each other...


Wealthy capitalist countries like France and Norway can generate large amounts of money through taxation that support generous social welfare systems and advanced healthcare delivery systems.

Impoverished socialist countries like Venezuela or Cuba are too poor to support generous social welfare systems or advanced healthcare delivery systems.

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Re: Oil Has Cursed Venezuela

Unread postby evilgenius » Wed 20 Dec 2017, 13:51:41

For one thing, when resources are gained through lease agreements with the government over the land's mineral rights it establishes a risk/reward relationship with the resource. A known resource ought to cost more because there is less risk involved, less chance of a dry hole. The pricing of such things incentivizes companies to exploit their leases because they are after potential reward in relation to the risk they are taking. It's more likely that they would sell into whatever market than pick favorites.

Nationalization picks favorites in the sense that it favors selling outside the local economy over selling inside of it. Hard currency issues, amongst other things, rise up to reinforce this outlook. These rise up necessarily because such thinking doesn't encourage local borrowing, which is the heart of money supply creation. Giving money away doesn't encourage that either. In that sense it is no surprise that Venezuela would be undergoing hyperinflation right now, as another thread just brought up. This doesn't allow for the development of local businesses that use the resource that is produced locally. Maybe they export the things they make from that resource outside of the country. It's those businesses that really power an economy. They multiply the value of whatever is extracted from the ground many fold, and keep it, more or less, inside of the country to the degree required to maintain that economy as a separate economy apart from other economies, powerful enough to stand on its own and attractive to trade with.
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