The Venezuela Crisis: State Of Disaster | From the Vault

[00:00] Let's get some facts. 37% of you aren't subscribed to this channel. That's almost four out of 10, just freeloading the alpha. So, come on, hit subscribe, and I promise to keep leveling up the show with the best guess and the juiciest insight. Go on, do it now. Welcome back to Real Vision. Today, we have a blast from the past. We are resurfacing our documentary on Venezuela in crisis. feels like the perfect opportunity to bring this one back up to the feed considering everything going on
[00:30] geopolitically. While it is a little bit old, it's still very, very relevant. So, check it out and let us know what you think in the comments. And don't forget to join Real Vision. [music] >> [music]
[01:11] >> I've never seen a case that really fits this complexity. [music] >> In terms of decline from their peak, I I don't think I've seen anything quite like this. >> [music] >> We need to get people eating [music] fundamentally. We need to get people eating. That comes actually before the politics. Of course it does. The state's a disaster. It's, you know, this is not
[01:42] a functioning place at all. >> Cops just shoot people in the street because they don't trust the appeal system. It's not clear if Maduro falls what would replace him. In order to learn how Venezuela went
[02:12] from being the richest nation in Latin America to [music] becoming a disaster state, we went directly to the impoverished nation to speak with the people living, [music] working, and surviving there every day. [music] >> [music]
[02:43] >> In order to make ends meet, [music] Louise quit school to find work so he could buy food for him and his mother. foreign.
[03:39] The story Luis shares is heartbreaking, but it's not unique to him. [clears throat] This is the day-to-day life in Venezuela. People can't buy food because the [music] cost continues to rise by over 50% each month. That's the hyperinflation. Paper money [music] is essentially worthless. That's the broken economy. And the shelves at stores are bare because the government keeps reducing imports in order to try to balance [music] the budget. That's the corruption. For clarity on these factors, Real Vision is fortunate to be working [music] with Jay Newman, who came to us
[04:09] with this project in mind. Nobody knows the geopolitical [music] world better than Jay does. He's been an investor in developing countries for over 30 years and [music] was recently profiled in the Wall Street Journal saying that the situation in Venezuela has captured [music] his focus for a variety of reasons. Jay and I got to talking and we realized stories like Louis's need to be told. Venezuela is [music] one of those slow motion train wreck. People have seen it coming for years. They've been part of it for years. They've watched Chavez and now Maduro for years and for
[04:41] at least a decade, probably even more, people have said things cannot get any worse in Venezuela. And then they get worse every single day, every week. So what interested me is the question of how a wealthy country so close to the US can be in such dire circumstances. to try to understand [music] what can be done to fix it. >> Talk to me a little bit about the emotions that the leadership of Venezuela [music] elicits when you
[05:13] consider what's happened. >> Venezuela is a country that has tremendous wealth, human [music] capital, weather, land, and it's been destroyed. And how does bad government take root and and really thrive? Because in a perverse way, that's what's happened over [music] the last 20 years with Chavez and Maduro. Bad ideas, bad government [music] and corruption have thrived. There has been no more complex situation [music] from the perspective of geopolitics
[05:45] and debt and the intersection of geopolitics, economics and debt than Venezuela. And it's important to think about how a country that has been isolated so dramatically can be brought back into the western world which is where it belongs. Being an isolated nation means limited trade and therefore limited resources. That helps explain why 90% of Venezuelans are living in poverty. In fact, the average Venezuelan lost over 20 [music] pounds in 2017.
[06:16] They're starving. They're dying. and the leadership has failed to address the crisis. We spoke with leading experts to better [music] understand the devastating impact of hyperinflation, which continues to [ __ ] [music] the nation's economy amid rising rates, low wages, and a failing currency. People treat the bullyard like an ice cube. The minute you get paid is an ice cube that you've taken out [music] of the freezer. And you better have something to do with that ice cube because the longer you wait, the less of it there's going to be. [music] whatever you can get for
[06:46] that ice cube. Ideally, dollars because those will preserve their value much better. But if you can't find dollars, you buy bottles of Tide, you buy cans of soup, you buy uh toothpaste, you buy whatever is on hand because that's going to preserve value either through barter or resell much more than the currency [music] is. That means that money is for all intents and purposes worthless. >> Back in 2012, the minimum wage was $192. Today, the minimum wage is $20.
[07:18] Furthermore, a cup of coffee costs just under 450 bolivars back in 2016. Today, [music] the same cup costs over 7 million bolivars, which is equivalent to about 50. To combat inflation, President Maduro simply cut 5 zeros off the currency in August of 2018. So those 7 million boloulevards are 70 today, but still represent a 155,000% [music] increase in the cost over the last year. And if you purchased a million dollars
[07:48] worth of Venezuela's local [music] currency when President Nicholas Maduro came to power in 2013, it would now be worth $2.50 today. [music] But these are just the numbers. What does that actually mean in practical terms? >> [music] >> To find out more, we spoke with Fatima, who works at her family's bakery in Karacus. [music]
[08:25] for [music]
[09:03] >> [music] >> Part of how you get into hyperinflation is a government that makes promises and that it cannot keep. This is an economy that has been devastated not just by I think autocratic populist policies but by a legacy of corruption. And these are hard things to overcome >> if you're going to print money and the curve looks like that um and it's going up thousands of percent every every month, year, whatever compared to say 6%
[09:35] annually in the US, of course you're going to get hyperinflation. Of course you are. >> Another drawback of hyperinflation is a failing health [music] care system. Venezuelan hospitals are broke and doctors are unable to provide patients with proper care. >> [music] >> You went
[10:16] medical professionals are nervous about speaking to the [music] press for fear of government retribution. ution. Carlos Leyon, a doctor at the Karacus University Hospital, [music] agreed to speak with us only from the safety of his car. >> We cannot provide them anything because there's [music] no medicine. There's no drowning water. Mostly there's no electricity. Sometimes we do tell the patients you have to bring your own light bulb to be able to have light [music] in your room because the
[10:47] hospital cannot uh provide them because of how fast they installed them. to know that you could have helped them and you didn't because you didn't have a cast patty or you didn't have rubbing alcohol or you didn't have just [music] the basic um they're probably going to die. If you go on Twitter, you can find anxietydriven parents whose sick
[11:18] children need some medication that they can't get hold of, which would be essentially free to them if it were available. >> It's been incredible to watch this this unfold from a country that was relatively normal when I got there to this, which is, you know, is worse than refugee camps I've seen across the world. It's it's a real crisis now. >> [music] >> Venezuela, even when I lived there in the late 2000s or earlier [music] 2010s, politically was a disaster. The human rights situation was increasingly grave,
[11:49] but it was livable. That is no longer the case. [music] Uh it's very dangerous. Nobody goes out at night, and [music] that's something that has created a siege mentality that permeates uh both among the government who are worried about what happens if they ever lose power and among the population. To understand what's going on in Venezuela, let's [music] dive deeper into its past. Since oil was discovered 100 years ago, Venezuela has sometimes lived well on wealth derived from natural [music] resources. The downtown
[12:19] area is dominated by the central Simon Bolivar, another example of the prosperity oil has helped to bring [music] to Venezuela. >> But more [music] often that wealth has been squandered or stolen by incompetent or corrupt leadership. Therefore, [music] Venezuelans saw some benefits when oil prices were high, but suffered disproportionately [music] when revenues fell. In the '90s, funds dwindled and inflation and poverty rates rose. People grew restless
[12:50] >> and turned to a leader who had served in the military, attempted [music] multiple coups, and was seen as a champion of the working man, Hugo Chavez. or they just loved seeing somebody on TV or or in person who was talking their language >> politically. It was it was a very smart move to say, "Hey, let's give a voice to these people." And and it was phenomenal to [music] see him.
[13:20] Drawing on Fidel Castro's playbook, [music] Chavez championed his own brand of socialism, which became known as Chavismo. Eventually, oil prices rose and the state oil company Petrovesa became [music] more profitable. From there, Chavez was able to dribble out money into social programs. [music] But from the very beginning, Chavez and his cronies used government funds to line their own pockets. In addition, social programs often took a backseat to distributing wealth to Cuba and other Caribbean nations [music] in order to buy influence and recognition. What might have become a nest egg for the
[13:50] nation to buffer bad times [music] became a money sink as Chavez spent well beyond his nation's means. In the end, Chavez's policies led to more debt and even more inflation. We Venezuelans are we we like colorful metaphors, but it's that for a long time corrupt politicians all peed in the pool, but the Chavez administration was the first time you could pee off the diving board. You there's no secrets in Garagas. You could
[14:21] wear Rolexes uh on a government salary for all your life uh and you were essentially untouchable unless you crossed some political boundary and then regardless of whether you'd done something wrong or not, you were a target. >> He had the residual loyalty of having launched these two coups in 1992 uh from both the army and a lot of the population uh and he also had a lot of money. Uh so he was able to promise much, deliver less, but use basically
[14:52] patronage networks and uh personality that resonated to bridge that gap. >> He was somebody who had no schedule. You know, he could be working between 3:00 a.m. and 6:00 a.m. and then, you know, be exhausted, sleep, and wake up and start working on something else. And it's also extremely challenging for his opponents because he would uh basically exhaust, you know, your his his opponents by always being on the attack.
[15:24] He was always on execution mode. [music] So, a quick break in your regular programming. If you're serious about your future, grab my free report called Prepare for 2030. I think you've got 5 years to make as much money as possible, and this guide will help you navigate what's coming. The link is in the description. Download it now. >> As time went on, likely with Castro's
[15:54] encouragement, Chavez drew more and more inspiration from disreputable [music] neighbors like Ava Morales of Bolivia and Raphael Korea of Ecuador. These men dealt with their political rivals through [music] unconventional means. Chavez took note and became increasingly authoritarian and went after adversaries who were seen [music] as a threat to his rule. Chavez at times seems to have also been working handin glove with the Colombian terror group FARC to move drugs and to kill rivals.
[16:24] >> He had purged most of his lieutenants [music] at that point. most of the most capable uh members of the uh United Socialist Party, if they flew too high, he would clip their wings, which is a can be a good system to make sure you remain in power, but if you're suddenly [music] gone, uh it leaves very much of a vacuum. The system starts falling apart when Chavez dies much younger than anybody would have expected. He was a compulsive coffee drinker. He uh smoked.
[16:54] uh he gets cancer uh at a relatively young age, dies. He was replaced by Nicolas Maduro uh who was essentially a surprise to many Venezuelans in [music] part because he was seen as a bit of a comic figure. Claudius survived Caligula killing everybody by pretending to be [music] mentally disadvantaged. Uh he was a clown. Nobody took him seriously. And for a while, I could have sworn that Nicholas Maduro had been Claudius, that he had been pretending to be completely
[17:27] inept uh to survive in the high-risk world of United Socialist politics in Venezuela. And that now that Chavez was gone and he had gotten the nod, he was going to leap into action. Uh that never happened. Mcaveli tells us it's better to be feared than loved because fear you can control. And Chavez [music] was loved. Uh, Maduro has never really been loved, but he has learned to use fear quite well. Uh, and what the government has [music] done more and more is use violence to bridge that gap. Uh, and to
[17:57] keep the, uh, Venezuelan opposition and the Venezuelan people in check. So, you have sort of an unpopular post populism. Maduro's sole claim to legitimacy, given how unpopular he is, is that Chavez said, "This is the guy. This is the person. This is the rock on which my my [music] movement is going to continue without me." uh and the more he departs from the way Ugo Chavez did business even though the world has changed uh the
[18:28] less secure he feels. But he remains in place because while unpopular and broke the levers of [music] power, his ability to keep certain key constituencies including uh some of the wealthy or uh people who have close relationships to the government and certain military interests, he's managed to keep them [music] uh happy. A regime change is scary to many leaders within the military because if a new government were to ever come to power, regardless of how bad this government gets, a new
[18:58] government might investigate what happened to the world's to history's biggest oil bonanza, which has disappeared, leaving less than 10 billion in the national reserves. In recent years, Venezuelan oil production has fallen off a cliff thanks to statewide corruption. Venezuela is estimated to have over 300 billion barrels of oil, 20% of the world's proven reserves. And in 2008, it produced 2.5 million barrels a day. However, this year, it's estimated that production may drop by 75% to 600,000
[19:28] barrels a day. But the fundamental mistake was made decades ago when Venezuela chose to focus on the oil sector to the exclusion of everything else from agriculture to minerals to tourism. According to OPEC, Venezuela's oil revenues account for 98% of export earnings. So periodically when oil prices drop, [music] Venezuela has no other exports to rely on. That's the one drawback of being a one-dimensional economy. Coupled with the degradation of the oil production infrastructure, it will [music] now take billions of dollars to revive production.
[20:00] It would take, I think, conservatively probably 15 to20 billion dollar a year uh for maybe 10 years to get it back to where it was pre Chavez. >> You got $800 billion of oil minimum under the ground. It's a huge economic financial incentive for people to figure out a way to stabilize things and increase it. >> And oil they are falling at a rate of 50,000 barrels a month. Some of that has to be used domestically. Some of it goes to countries like China uh and Russia
[20:31] who don't pay cash for it because it's being used either in barter or to pay off on previous debts. So the actual cash they get from that is collapsing even more dramatically. >> If the government, central government collapses, then people are going to be smart enough to cross the border, set up an oil field and start selling oil. It's going to happen. >> I'd like to see a more diverse economy, one that uh which is more democratized as from an economic point of view. That's going to take time. Every leader of Venezuela, including Chavez and Maduro, has [music] talked
[21:01] about how important it is to diversify economically. The best time to diversify economically is when you have a lot of extra capital [music] that you can use to buttress fledging in fledgling industries and try and find a way to make them competitive in a in a ever more [music] international marketplace. Venezuela has the world's largest oil reserves yet the cheapest gasoline. [music] In the 80s, Venezuela attempted to raise the price of gas to stay in line with global standards. However, the people revolted and it's since been an untouchable aspect [music] of the economy. Right now, in dollar terms, one
[21:33] buck can buy you nearly a million gallons of gas [music] in Venezuela. Oh my god, gasoline. You pull up, they don't [music] even want to take money at the gas stations. Like, gas is so cheap that the gas station attendants are just give me a couple eggs or give me whatever you feel like. Essentially, gasoline is given away domestically. We pay, I think, a third of what the Kuwaitis pay. [music] >> With the inflation, you can't have something like that function, especially if you cross the border and gas is normal prices.
[22:03] >> You could fill up a a tanker truck with with gasoline for $7. You could sell that 100 meters away across the border for $25,000. [music] >> I mean, it's just one illustration of a entire economy that's totally silly. Amid
[22:42] the misused resources and the corruption, crime has become endemic in the country. 73 Venezuelans died in violent deaths every [music] day during 2017. That's over 26,000 murders in one [music] year. And while official stats aren't kept in regard to abductions, many believe a key driver of the violence is kidnapping. >> Use a personal example. I met my wife uh during a kidnapping in Venezuela. And
[23:12] this was in 2010 when things were a little bit easier. Uh, and we ended up getting kidnapped by a bunch of offduty cops, uh, who then tried to ransom us off and, you know, beat us up a little and, uh, you know, took pictures of us to send to our family members to try and extract as much money as they could. Not only did they spend time trying to find out what they could get for us and interrogating us, just something cops [music] are trained to do, one of them took the time to explain to me why he
[23:42] what he was doing was okay. And that made the fact, you know, whatever they might do to us, uh, was justifiable. They were in sense sort of, uh, modern-day Jean Valjon figures, not criminal cops who were killing people in or not killing people in exchange for money. Cops just shoot people in the street because they don't trust the penal system and they [music] don't have time to deal with it. uh you have opposition or even protesters who get taken into
[24:12] dark cells and you know with names like the doom uh and then get tortured as a you know routine bureaucratic measure. Violent crime and ongoing corruption remain a constant across Venezuela. And as a Venezuelan government refuses to work with the rest of the world to reach a solution, [music] the US has turned to sanctions as a means for encouraging change and punishing those who remain in power. the strong ones and the less than strong ones. Every option and you know what I mean by strong. Every option is
[24:43] on the table with respect to Venezuela. >> Sanctions have become the Swiss Army knife of American foreign policy. It's become kind of the go-to tool. And so you see that when they feel frustration or anger with what's going on there, there is this tendency to turn to sanctions and think what you can do more. Among the sanctions are a prohibition against US purchases of Venezuelan bonds. However, with anticipation of the restriction one day being lifted, people
[25:13] like Hans Humes and Jay Newman have considered the investment opportunities that could emerge. Yet, even Newman, who led a multi-year, multi-billion dollar negotiation with the Argentinian government, acknowledges that this is an unusually sensitive situation. creditors are going to be faced with the need to consider not just their own parochial self-interest uh in getting paid, but how to help Venezuela get back on track. There are lots of creative ways to do that. Venezuela has mineral resources,
[25:44] it has uh oil resources, has agricultural resources. All of these can be currencies that investors can be encouraged to uh invest in in order to uh make a bigger pie. But I think that's something that creditors are not used to thinking about. Uh and they'll have to in the case of Venezuela. >> There's no way they could manage the economy worse than they have. But I, you know, I think that in order for my investors to make money, I don't need Venezuela to become [music]
[26:14] Germany. I just need Venezuela to become kind of like Venezuela was before. If you say in or out now, I'd say I'd rather be in than out because I do think there is a a a recovery story in which you do quite well. Just losing Maduro and putting someone who maybe, you know, [music] speaks English and uh, you know, hasn't had a lot of, you know, crazy talk about how his [music] dead predecessor came to him in the form of a bird and told him what to do.
[26:56] The bar is so low that really anything could seem or be marketed actively as this is a step up and now we're getting serious and now we're going to reform. I don't think there will be a um sustainable solution if there is no [music] dialogue inside the country and some sort of political deal that forces [music] everybody there to uh respect whatever institutional arrangement is [music] agreed upon uh between the different political forces of course with participation uh from the [music]
[27:26] international community but it it must be solutions from within >> the role that China, Russia, Cuba, India perhaps even to play in a post-madura regime will be absolutely critical. I do think the ambition should be to bring as many of those countries on side in saying look [music] you have an interest in the country leaders change and we will embrace a restructuring process that allows in a sense uh the international community to be broadly
[27:56] engaged. [music] As Venezuela becomes increasingly unlivable, an exodus out of the nation continues as [music] hundreds of thousands flee for safety to destinations including Colombia, Brazil, the US, and the Caribbean. However, in order for a recovery to take hold, the experts believe more must be [music] done to encourage native Venezuelans to come back home. >> [music] >> If those international skill sets, international capital, international contact and international ethics standards [music] can be brought back
[28:26] into the government, I think that the chances that you could have a paradigm shift becomes much higher. But the question is how do you incentivize people to do so? [music] Venezuela for a long time, even after Chavismo had been there for a while, um, [music] and assuming you weren't working in politics, was a great place to live. >> The tourism industry should be huge. It's got some of the best beaches in the world, the world's tallest waterfall, these amazing jungles, um, and mountains. It's it's got everything, agriculture, [music] and it's got the
[28:56] oil. >> So, there's ample opportunity and ample natural wealth for the country to come back to [music] what it has been historically. >> I think we have to be hopeful. Um, and I [music] think that um, it's a place where international institutions and international relationships can be brought to bear. So the IMF, the [music] World Bank, the International Finance Corporation, all those Brettonwood institutions that um help countries uh develop strong institutions uh can [music] all play a role. I think the United States can play a role. Trade
[29:27] and international relationships are [music] uh much more productive than isolationism. The ultimate goal is to [music] uh uh invest in a way that's productive, that provides uh uh jobs, that [music] uh makes money for investors. Uh because making money for investors is going to make money for Venezuelans. The incredible thing is even amid the carnage, investors [music] see opportunity. They see a country blessed with incredible resources and a vibrant
[29:58] culture. They see a dramatic turnaround happening in Venezuela. [music] They see an end to Venezuela's torturous road of hyperinflation and starvation. But the tragedy of it is the situation [music] threatens to get even worse before it gets better. And with Maduro, it's like a wall built around a state [music] of disaster. Hopefully, one day, true leaders will be able to go in and help effectively address the [music] crisis. For Real Vision, I'm Brian Price.
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