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opinion | Ricardo Hausmann

Venezuela’s president is crafting a disaster

Venezuela's President Nicolás Maduro.Carlos Garcia Rawlins/REUTERS/file

You’re a professor at a university in New England. You have gone on a business trip to the Middle East. At 3 a.m., as you are trying to catch up with your sleep and your jet lag, your daughter calls. She is distraught because President Obama has just gone on national television and spent 10 minutes telling the country that you are a thief and a financial assassin, that you conspire with dark foreign forces to harm the nation. While on his rant, he orders the prosecutor general and the attorney general to act against you.

You know that all these accusations are groundless, but it is easy to imagine what would happen next. Before you had a chance to call your lawyer, CNN, Fox News, MSNBC, and CNBC will be calling to ask you to confirm or deny the charge. They’d dig into your background, your Twitter feed, your publications, and your acquaintances to try to find out who you are and why the president is saying these things about you on national TV. Given the absurdity of the claims, leaders in Congress and the Senate would call for the creation of an ad hoc committee to look into President Obama’s mental health or into his impeachment for abuse of power — as well as all sorts of other grievances they already have against him.


In any case, as you contemplate the information that your daughter is delivering, the only fear that comes to your mind is that your daughter may be having a schizophrenic delusion, because such a ridiculous event could never happen.

And it cannot. The rule of law, the system of checks and balances, and a universal culture of respect for freedom of speech would make such a story completely impossible in the United States.

Nonetheless, the story is true — except for a small detail. The president in question was not Obama but Nicolás Maduro, the despot who currently rules the country of my birth, Venezuela. The fact that such a thing happened is just another symptom of the lack of freedom in my country.

Watch: Maduro’s rant

How did we get here? On Friday, Sept. 5, I published my monthly syndicated op-ed in the United States, this time cowritten by my compatriot and colleague, Miguel Angel Santos. It discussed the catastrophic economic mismanagement of Venezuela. In spite of high oil prices, the country has been running double-digit fiscal deficits for the past three years. Unable to find people to fund the gap, the Central Bank has been printing money as if it was going out of fashion. To prevent Venezuelans from taking all this Mickey Mouse money out of the country, bank officials instituted exchange controls.


At present, the dollar in the black market fetches 15 times more bolivars than at the stronger of the three official exchange rates. Inflation is the highest in the world right now. Generalized price controls have led to massive shortages, including medicines and medical equipment, causing hospitals to suspend cancer treatments and all but emergency surgical procedures. Shortages of spare parts have grounded much of the bus and truck fleet. Airlines have stopped flying to the country.

In part, this grim situation is the fault of the government, which has defaulted on several large debts. Facing elections in 2012 and 2013, the government authorized more imports than it could afford. As the bills came due, it stopped paying them, building up a mountain of arrears measured in tens of billions of American dollars.

Wall Street, looking at this disaster unravel, has been treating Venezuelan bonds as among the riskiest in the world, demanding risk premiums that are twice those of Bolivia, four times those of Nigeria and 13 times those of Mexico or Chile. They clearly fear that default may happen. In our article, we asked why a government that describes itself as “Bolivian Socialist Revolutionary” would have opted to default on the import payments it had authorized but not on its foreign bonds? Why default on 30 million Venezuelans, but not Wall Street?


Since the op-ed was released, risk premiums have gone up further, as the market reconsidered the likelihood of repayment. It was this outcome that triggered Maduro’s rant.

But why a threatening rant? Why not an argument about alternate facts and figures that might persuade the markets otherwise? Why did he think that lying about me would make him more credible to Wall Street? Was it a tactic to divert the moral issues we raised, or is it just what happens to despots that have no checks on their power and no need to think twice before they talk? I don’t know the answer.

A small stencil of current Venezuelan President Nicolás Maduro, left, is dwarfed by a mural of his late predecessor, Hugo Chavez, on a wall in Caracas, Venezuela.Rodrigo Abd/Associated press

The other question is how scared should I be, given Maduro’s judicial threats? From abroad, Maduro looks like a buffoon — another version of Chavez or Mussolini. I doubt he will be able to do me much harm.

But Venezuelans trying to make a living in that country and who speak their mind need to be much more courageous. They can have their passports removed, their request for foreign exchange denied, or their business shut down. The government could throw them in jail for a year or two while it prepared a trial against them.

After all, Leopoldo Lopez — a former mayor, a graduate of the Harvard Kennedy School, and a leader of the opposition — has been in solitary confinement since February. He is accused, in essence, of speaking his mind. And this, in spite of massive international demands for his release, including by the US State Department, which criticized his trial as a farce. Hundreds of Venezuelans are in jail, and thousands have pending court cases for expressing their opposition to the government.


So what did I tell my daughter that night? I told her not to worry about me because I am free, but we should all worry about Venezuela because it is not.


Oliver Stone and Mark Weisbrot: Obama wrong to isolate Venezuela

Farah Stockman: Politics of oil in Venezuela

Stephen Kinzer: Compassion does not necessitate intervention

The Podium: A new role for the US, Venezuela

Ricardo Hausmann is a professor at the Harvard Kennedy School and director of the Center for International Development at Harvard University. He is a former minister of planning of Venezuela.