An open letter to Moisés Naím

Dear Moisés,

I hope you won’t think it brash of me to use your first name. We’ve only met once, briefly, back in 1990 when I was an economics student asking you to come to a forum at our University. You don’t remember it, but I do. Still, I allow myself to treat you informally because I’m writing this as a fan, not a critic.

Back in 1989, I was a freshman economics student at UCAB, and you guys were our heroes. We saw you, Miguel, Ricardo, Gerver, Ana Julia, and the others as real revolutionaries: the people with the courage and the vision to do the things our textbooks told us needed to be done, forging, contra viento y marea, the Venezuela of the future, the country that would finally live up to its potential.

You may not know it, but your experiments in deregulating, fostering growth, and digging us out of the petro-state morass inspired a generation of economists who, like myself, came of age literally breathing the fumes from the burning cars of the Caracazo.

Which brings me to the fascinating, maddening interview you gave Mirtha Rivero in ProDaVinci recently.

Rivero’s cornering the market for CAP-II-ology these days, and I can see why. She has a knack for putting the reader right there on the scene, reminding us what it was really like to be Venezuelan and alive at that pivotal, turbulent moment, the key juncture when the country might have reached for the stars, but instead went to the dogs. And she also asks good questions, don’t you think?

The picture you paint of the challenge facing CAP’s second administration is stark, and underlines that the “Washington Consensus” might have been a Consensus in Washington, but it was no such thing in Caracas.

People didn’t understand or accept that we had no alternative. You could make speeches, you could posture all you want, you could fret about the situation of the poor but, in the end, the reality is that we had no money. Period.

What’s more, we didn’t have a mechanism to keep price controls in place, there was no way to continue disbursing Exchange Controlled (Recadi) dollars at an artificial rate, we couldn’t keep protecting inefficient industries or subsidizing state firms that year after year lost obscene amounts of money, nor could we sustain a huge and sclerotic public sector that made everybody poorer. We had to take apart the whole apparatus of administrative controls that was choking the economy and impoverishing and corrupting Venezuela. And it was all connected.

First, we needed money: if the multilaterals like the IMF and the World Bank don’t lend to you, nobody would. The multilaterals said they wouldn’t cough up one penny if you didn’t get rid of the multiple exchange rate system – that is, Recadi – which was a source of economic distortion and huge corruption. Liberating the exchange rate forced you to liberalize prices, and this forced you to open up to international trade and reduce import barriers.

Because if you let the exchange rate float freely, it was impossible to keep prices controlled administratively by the Development Ministry. How can someone sitting behind a desk in a ministry know what the price of soap is, of bread, of some medicine or of thousands of products if the price structure for each of them changes daily, as the exchange rate floats, as interest rates and input prices float? How can a mid-level ministry official, badly paid with little education, know what is the “correct” price for toothpaste that millions of Venezuelans use every day. He doesn’t; he can’t.

So you can’t keep price controls – besides, it was a myth that they were “controlled” – and so you had to free imports. Otherwise, if you didn’t, inflation would spike out of control, because sellers would have no reason to keep prices down, since you’d be keeping their competitors out through controls. That’s why we needed to get rid of them; so the guy who sold tires, for instance, didn’t charge more for those tires than what it would cost to bring them from abroad. We needed to introduce international competition to limit the prices that industrialists and local businessmen could charge.

So it was all interwoven.

The country had no options, and doing one thing forced you to do the next, and then the next. But that explanation I just gave you was never accepted by those who criticized our economic policy. They all proposed “gradualism”. They’d come into my office or call me to testify in congress and they’d ask for gradualism. In practice, that meant subsidies and protection for the interests they represented and shock for the rest of the country. 

The unions, the industrialists, the multinationals, SMEs, the indigenous groups, the teachers, the doctors, the bankers, the universities, the military, businessmen…all of them got organized to pressure the government and try to extract subsidies and protections that would shield them from the inevitable adjustment costs of what we had to do.

The reality is that no democratic government chooses to impose an economic shock on its population, on its voters, if it can avoid it. That debate about shock vs. gradualism, was in fact a totally hypocritical, manipulative and histrionic. There was no option to do it differently, the country was out of options.

I’m quoting you at length here just to show how, in some ways, it’s possible to almost give a (certainly unintended) chavista reading to your frustrations. The idea that you could undo the Venezuelan License Raj without a frontal assault on the power groups that benefited from it was always an illusion.

Reading your response carefully, it strikes me that your argument is self-refuting. Surely you realize that no government can hope to win a fight with the unions and the industrialists and the multinationals and SMEs and the indigenous groups and the teachers and the doctors and the bankers and the universities and the military and businessmen – and all at the same time. It should have been evident that, whatever the economic costs, “protection for favoured sectors and shock for the rest of the country” was going to be a political necessity.

And yes, of course, hindsight is 20/20. The amazing thing, though, is that you’re sticking by your guns! Twenty years later, you still can’t see that CAP II bit off much more than it could chew. That 18 years after the publication of Paper Tigers and Minotaurs, you still can’t really say what you could have, and should have, done differently strikes many of us as simply sad.

Moisés, nobody will question the brilliance of your intellect. In fact, it’s the juxtaposition of your smarts with your inability to genuinely introspect that makes the interview so electric.

But time and again, you make thoughtful arguments that subtly undermine themselves. Time and again, we keep asking when you will stop blaming other people (Reinaldo Figueredo, Marcel Granier) and start questioning what your team got wrong.

For instance, you are very much concerned with challenging the conventional wisdom that CAP II had “good policy but bad communications” – without mentioning, by the way, your own role in establishing that narrative in the early 90s. You do so by noting just how deeply entrenched the Special Interests really were. Here, you reach for a perfectly Kafkaesque illustration from that era, the Horse Track at La Rinconada.

Venezuela in 1989 may have been the only country on Earth where a large gambling venue consistently lost money. The Nationalized horse track consistently made fortunes for a handful of rich, well-connected horse-breeders…but losses to the Venezuelan state. And you’re right to remember, as a galling absudity, the huge, immovable entrenched opposition any attempt to privatize it met!

When you can’t even get political support to privatize a loss-making horse track, you want to know, what hope is there, really?

But it’s an anecdote that illustrates almost exactly the opposite point than the one you want to make. If your communication strategy – hell, if your political strategy – is so badly misconceived that you couldn’t even win the public over to a plan to sell a loss-making horse track, exactly how bad at communicating your agenda were you, really? And if your government can’t forge the necessary coalitions to make something as simple as selling a racetrack happen, then how can you expect to forge a consensus in support of privatizing the CANTV?

Had CAP been a shadow of the communicator he was reputed to be, had his populist instincts survived that 10-year stint out of power, he would have realized the Special Interests he was fighting were serving their own heads up on a plate.

The narrative writes itself: The People vs. The Powerful! “These fatcat horsebreeders are taking the arepa out of your children’s lunch plates!” It’s an easy, almost lazy frame that could have worked, largely because it was factually accurate. CAP II really was an exercise in trying to decouple entrenched, rent-seeking special interests from the public sector teat. Framing it as such couldn’t even have been portrayed as populism: it was just a matter of fact.

The framing was right there, staring you in the face! Why didn’t CAP take it?

I suppose CAP was too much a child of AD to govern in histrionic opposition to all of its component interest groups. To do so would’ve required a kind of revolutionary temperament he just didn’t have. But that’s not the only reason, is it Moisés?

Could it have been that such framing would’ve been laughable coming from a government run by the elitiest of the elite? Might it have something to do that Miguel Rodríguez, Moisés Naím, and Ricardo Hausmann could never have passed the snigger test posing as populist firebrands? Or could it be that CAP’s ability to keep his appointments and micro-manage his ministers, which you perhaps correctly applaud, kept him from taking care of the big-picture coalition-building that a revolutionary government – like his pretended to be – actually needed to survive?

These things seem desperately obvious to me, and there is one potential corollary. Perhaps the real mistake was naming you guys. Perhaps you should never have been cabinet-level in the first place.

Don’t you think the frightfully competent technocrat, as a political subspecies, belongs at vice-minister level? Wouldn’t the A-Team been better off behind the scenes, away from the microphones, and in support of people with the political skills to build the coalitions and make the compromises needed to make reform durable?

An introspective look back at those years would probe those types of questions. But perhaps Rivero’s questions didn’t go there – or perhaps egos prevent us from even asking them ourselves and answering sincerely.

It’s a lot more comfortable to blame Ibsen Martínez, anyway …

But here too, amid the evasions, the unanswered questions lurk. Viéndolo bien, why was the portrayal of CAP II’s reforms in Por Estas Calles believable? What gave it legs?

How could a program to radically reduce the power of the special interests that had captured the state be successfully caricatured as an powerplay by special interests to capture the state?

Lurking in the background of all of this is the shadow of the Caracazo. Perhaps the real answer lies there, in the early days of CAP’s revolution. Pretending his government had not been crippled by the massive human rights violations that took place under his watch, plowing through with his agenda, trying to undo Recadi and raise the price of gas and eliminate price controls and privatize state-owned companies and establishing Central Bank Independence – well, it strikes me as suicidal, right?

I know what you’re gonna say – we had no choice. We were broke. These were the conditions laid out for us by the IMF and the holders of Venezuelan debt.

All that is true. And yet – could a country sitting on 78 billion barrels of oil reserves really say it had no choice? I mean, we had no foreign reserves and oil back then was cheap. But we’re not Haiti, and we never were. Was there really nothing else you could have done? Not even after the invasion of Kuwait did we have a bit of breathing room?

Or could it be that an ideological commitment to adjustment made you willfully blind to the alternatives we did have?

Because if Ibsen Martínez was able to do the number on y’all that he did, don’t you think it’s because people intuited, deep down, that you were more concerned with what they would think of you in Davos than in Carapita?

And isn’t that, right there, the crux of the communications problem the government was facing?

These are the real questions stemming from the experience of the early 90s. They will become vitally important for when the nation is forced to tackle what comes after Chávez.

Sadly, those are questions I feel you, and the country, still have not come to terms with.

Perhaps some day someone will ask them, and you will provide us with the answers. But in the meantime, the feeling I get from the experiences of those days – which largely determined Venezuela’s economic and political course for the 20 years that followed – is that there is a lot still waiting to be learned.

I remain an admirer,

Juan Nagel.

117 thoughts on “An open letter to Moisés Naím

  1. Fantastic piece Juan!! kudos to you. But your article really begs a premise. You are assuming not only that things could have been done differently, but that in doing so results could have been achieved that transformed the country for the better while at the same time kept reasonable political and social peace.

    if we dig a bit deeper it´s obvious that mistakes were made, and as you say hindsight is 20/20. But the real question is what sort of compromises could have been reached that would have kept the Republic in peace but that would not have hindered the ability of the Government to implement the very changes those compromises were meant to permit? From here on out an endless trail of questions spin out. Who would you favour first? If we are to believe what Moises Naim says about the dire situation they encounter we have to agree with him that they had little room to manouver. Could they realistically make exceptions or concessions to third parties? In that case, would´nt that first step in that direction mire the rest of the program in endless negotiations that would have made transformation impossible? Of all the policy decisions which one would you leave out that would not hinder the implementation of the rest of the program?

    Once we get into this type of discussion I bet that each person will have a different answer, and I bet that they will be able to reason and back it up with infallible arguments. Maybe at the heart of it there is a miscalculation. Maybe everyone thought CAP would take care of keeping the ship afloat while everyone else made the necessary repairs. Maybe it is CAP the one that should be answering those questions. In the end the A team was brought to design a program and implement it, but it was probably CAP the one who had to sugarcoat it.

    In any case I thoroughly enjoyed this post. IMHO this is your best work yet.

    • Thanks Eduardo. Quico helped write this one, by the way. It’s kind of a joint post, but signed by me.

      • It seems to me that Juan and Quico have tried to identify the typical “external control locus” extensively described in venezuelans. It is our fingerprint, it does not matter how brilliant you are. Naim is a “paisano”…or not?

  2. I really liked it too. I think the hipódromo discussion really is the key here. You needed to build a narrative to favor reform. You needed a *story* to tell people about what was at stake, who the good guys were, who the bad guys were, and why reform would help the good guys and hurt the bad guys.

    But the government couldn’t even build a narrative in favor of privatizing the horse track!

    I’m sorry, but that’s just political malpractice. And no, you can’t blame Moíses Naím for that. You have to blame CAP. He was the guy in charge. He was (supposedly) the Great Communicator, the guy with the common touch.

    ¿Entonces?

    • He thought he was going to have it easy and relaxed. The technocrats will solve the whole thing. After barely having anyone minimally knowledgable in the economics decision making process CAP thought an overdose of technocrats would balance matters and straighten the ship. It was a good idea in paper but he forgot to include politicians in the process. The lifelong politician himself bought into the demonization of politics that was in vogue at the time and favored purely managers. El Caracazo should’ve been his wake up call. Did he learn the lesson after all? I know venezuelans didn’t.

      During Caldera II, Matos Azocar (in)famously said (referring to gas prices increases) that “politics takes precedence over economics”. He also had it wrong, that’s Chavez recipe, it works if all you care about is staying in power. The goal should be to solve economic problems with economic solutions and political problems with political solutions. One shouldn’t impede the other but instead go together and help each other.

  3. Juan

    Good rant. Two points of detail: early you wrote nationalization while I think you meant privatization of la rinconada… and the other one is that the stint out of office of CAP was not 15 but 10 years. I would not be a stickler but in this piece it is important not to distract the attention of the reader.

    You can erase this note if you want after you fix it.

  4. Juan,

    I think you are not being fair with Naim. He is right when he blames Por estas calles and the “Notables”. He is absolutely right. CAP and Naim were facing a complot by several instances of the venezuelan society.

    The problem is that every instance looked at its own interest, its own little world and failed understanding the whole picture. When you write a novel like “Por estas calles” and air it day in and day out, you are creating the conditions for what happened. Sure RCTV made probably a fortune at that time in commercial time and Ibsen Martinez gain notoriety…but it was the seed that made overthrowing Perez possible.

    We must understand that there was a complot against Perez and it was due to the lack of political vision that venezuelans of all political, social and professional standing allowed it. The Ibsen Martinez, Marcel Granier, Arturo Uslar Pietri, Rafael Caldera, Escobar Salón all have their bit of responsability on what happened in Venezuela.
    Why we lost a generation.

    Naim is absolutely right.

    • But Bruni, stop and look at the interview. Naím himself says that, at that time, he’d just written El caso Venezuela: una ilusión de armonía with Piñango at that time and therefore was fully aware that this kind of “complot” (a.k.a. known as people rationally attempting to maintain their economic position) was coming.

      Eso estaba cantao, Naím says so!

      What Juan (and I, since I did co-write) are saying is that if you KNEW this would be the reaction, then trying to fight EVERYONE at the same time was obviously a recipe for disaster.

    • bruni

      i did not live in venezuela those years so i do not know for sure what really happened. however in my returns home for vacations it was clear that there was a “cayapa” against CAP. my family had lost a lot because of CAP economic decisions, we almost lost our business. and yet we understood quite well that this was the way to go, that there was no other option. then again as victims of CAP price control schemes already, and with a business owner mentality i suppose that my family was able to understand the Naim point of view without too much trouble.

      in historical perspective, for juan, there were also major changes without gradualism that have taken place with success, that is, without requiring to unseat the president. i have in mind eastern europe countries such as poland…

      the thing is that in venezuela there were real interests groups and they would have no measure that would weaken their power. what undid CAP really is that he was reelected under a populist conception of his past and he did all the contrary he promised. that probably was more the key to everything else than communication, ibsen martinez and what not. all these groups had no problem to unite against chavez because all had the perfect excuse: he “lied” to them, not needing to decide whether the lies of CAP were justified by the situation.

      • And just to add to that great explanation, I well remember a lot of people in the run up to CAP II’s election saying they would vote for him “because all those bastards steal, but with CAP we’ll have some left over for us to steal too”.

        Can you just imagine that! I’m talking about folks from shoe shiners on up to the highest levels, in and out of government.

        I guess when the paquetazo came down, they realized there wasn’t going to be any leftovers, either.

    • Bruni, you forgot about Fidel sneaked weapons in and planned the *whole* thing? Haven’t you been reading Peñaloza? They also took VHS tapes of Por Estas Calles , got them inside a time machine and travelled back to 1988 to show them to the people in the cerros to provoke the Caracazo.

      No hay peor ciego que el que no quiere ver.

    • Bruni,
      I think he’s right in blaming people’s self-interest in bringing down the government. Where he fails is in evaluating what role he played in failing to change that reality.

  5. Chavez know this well and never fights with everyone at the same time. Whenever the resitance that mounts is too great he backs up a bit and lets it simmer for a while, and tackes a different sector instead. He comes back when the conditions are much better. In this the Comunist inteligentsia works much better thatn the CAPII experiment. Great Post Juan y Francisco, I also agree it is one of your best. You challenge the IESABoys’ heroic story to the core. Agreed, Venezueliand of the early nineties and so much more nowdays, only care about their personal and group interests, there is little Common Good in our nation. Achallenging culture to work with.

  6. Some of the military personnel involved in the Carmona coup had been thinking about a coup during CAP II. Their reason: CAP’s government plan was a vision from abroad; it was not by Venezuelans, for Venezuelans. To them, and many others, that was crucially important, which is how chavez got support, too. So the phrase about Davos vs. Carapita hits much more on the head of the nail than you or Naim seem to realize.

  7. Very good post guys, great job. You are absolutely right, CAP’s biggest hurdle was that he was indeed the ultimate insider. Even if he wanted to, there was no way he was going to throw verbal stones at his own glass house. He was the personification of the same system his government was trying to dismantle. They went at it with a “screw them all” attitude and the rest is history.

  8. Dear Juan Cristóbal,

    This is an excellent 2220 worlds article…but sadly you just have one forward looking comment:

    “These are the real questions stemming from the experience of the early 90s. They will become vitally important for when the nation is forced to tackle what comes after Chávez.”

    I think you over-emphasizes the non-assumed responsibility of your hero in trying to find the answer to important questions.

    And that’s one of our biggest critic to Chavez’s rhetoric.

    Yours,
    Sergio G.

  9. 1. Catharsis might be a better word that “rant.”
    2. The problem with competing self interests… a better word is called “demosclerosis” and the book by John Rauch is good reading for the non-weak-at-heart realists.
    3. As far as capital, there are lots of people like me… waiting for opportunity to dawn again in Venezuela so we can bring capital and invest in the place where I want to live and thrive and enjoy however many years I have left.

    • “3. As far as capital, there are lots of people like me… waiting for opportunity to dawn again in Venezuela so we can bring capital and invest in the place where I want to live and thrive and enjoy however many years I have left.”

      I’ve already started.

      It may sound premature, but it’s a hell of a time to make a bet.

      I am making mine.

      Hedged, a bit, but I think it’s time to position oneself for a better future.

      • So, how is it turning out so far. I have been in discussion with Swiss Bank that has a program where I can borrow Bolivars against US Dollars to invest in Venezuela. My hedge is that if I lose the property, I won’t lose my money. Meanwhile, the inflating Bolivar reduces my liability in dollars. What do you think?

        • It sounds almost too good to be true. How does the mechanism work?

          In my case I am investing in new machinery that is on order. I can’t go into much detail about the hedge, but it’s there in case we get expropriated.

          The key word is ETVE.

          • You deposit dollars in an impound account at the Swiss Bank (UBS) in the USA as collateral for a loan made in Bolivars in Venezuela. You make payments on the loan in Bolivars in Venezuela.

        • So if you lose the property, how are you protected?

          That is, if you can explain in a public forum, of course.

          If not, I’ll understand :-)

          • If the loss is related to government action, it is subject to international law. As for the loan, you tell me. If you borrow money from a Venezuela Bank to by property that the government expropriates…. what does the bank do?

          • “If you borrow money from a Venezuela Bank to by property that the government expropriates…. what does the bank do?”

            Tell you to pay up, I expect.
            or is it
            Send a bill to the govt. and hope to collect?

            Write it down from whatever the government owes the bank?

          • I don’t know for sure, but there must be law related to the expropriation process that handles assets and debts. I would expect that the bank’s interest in the property was expropriated as well. I just reviewed my Property Insurance and “Loss due to Government Action” is Excluded from Coverage! However, there may be coverage available.

  10. Excellent post guys.

    I want to read what you think the right path should have been.

    It will become the critical issue for the opposition candidates as they sell an alternative to Chavez.

  11. Naim was just a young guy that suddenly was named Minister, I met him once and I will never forget his words. I was working at a new institute devoted to engineering research that depended on his Minsitry. It still exists. And Moises said something like: “Ten years from now, somebody may accuse me of being irresponsible for giving a nascent institution the amount of money we are giving it (He said the number, I dont remember it). So be it, I am willing to take that chance”

    Or something like that…

    Yes, these guys were competent and idealistic and they were given the chance to dream and they tried, except the “traditional left”, Chavez and the “notables” decided that CAP was too uncouth for them. Politics, specially Venezuelan ones, was not their forte.

    Who would you want on your side?

    I would take Moises any day!!!
    (In another story we went to see Miguel Rodriguez on a IDB loan for science. The amount was US$ 90 million. Rodriguez looked at the papers and said something like: “(90 million? Is that all? Do you think that is enough? As we left, the leader of the project said: If it had been the previous Minister of Planning, he would have cut to it to US$ 45 million and we would all have left happy. Technocrats yes, naive, yes, they wanted a better Venezuela and thought the path was almost obvious)

    • Miguel,
      Great pair of stories! They kind of segue nicely into Alek’s question about what they could have done differently. For one, they could have applied real austerity, not austerity just pa’l perraje…

  12. Juan and Quico,

    Delightful post. Easy to read yet meaningful.

    Think it should be mandatory reference material for anyone trying to understand what not to do in the post-Chavez era.

    Saludos

  13. Great article Juan. I was too young to remenber the social, political and economical upheavals that ocurred in CAP II’s presidency but I have read many books and articles about it. I strongly agree with what you wrote. I had actually just read that interview because im currently reading La Rebelion de los Naufragos. From an economical point of view what CAP and his technocrats was necessary. It was a change (un gran viraje) that the nation desperately needed however its presentation and unilateral implementation was its ultimate downfall. Politically it was suicide to take these actions the way they did. To the average Venezuelan asking him or her to be hungry for a while so eventually he’ll have plenty to eat doesn’t make any sense. It should have been explained in detail. Some special interests would have certainly fought tooth and nail against it but with a better presentation some of them would have accepted the changes and the public would have as well. It was unfair to expect the average Venezuelan to have the education and foresight of a group of intellectuals with masters and doctorates from the USA. Whoever defeats Chavez next year must keep these painfully learned lessons in his mind. It will obviously be necessary to reduce the government in some ways but hopefully the next president will do it more gradually and present in a better fashion.

  14. Juan,

    To me, Naim’s story looks like a self-fulfilling prophecy. First, he proclaims that our society lives in a make believe happiness that cannot last, then he comes with a hammer and smash everything, making his prophecy come true.

    I’m not saying that El Gran Viraje wasn’t a necessity at the time. Shock Therapy was an already tested and successful economic policy (it worked in Post-War Germany and later in Post-Communist Poland). Nonetheless, like you said, it’s probably true that Shock Therapy was a risky bet in a socially fragmented country like the one Naim described in his book.

    (Although El Paquetazo had some social support policies, let’s not forget that…)

    On the other hand, you have to admit that events like El Caracazo are simply impossible to predict. In 1989 our democracy was a given and nobody could imagine something like El Caracazo happening. It was also unthinkable to imagine a radical leftist group conspiring in our garrisons, as it was unimaginable to see each and every kingmaker, intellectual and pretender kicking our democracy to death.

    Do you think that Naim or CAP would have done everything they did, had they known that El Caracazo or the demise of our democracy were a possibility? Like you said, Hindsight is 20/20.

    The fact is, that the awful truth that Naim keep on telling us is unfortunately that: the truth. I know you are aware of that. You can put all the make-up you want on that, but that won’t change the fact that those changes are still necessary and extremely unpopular.

    I get it, you’re disappointed at Naim, because he cannot see the error of his ways. But the way I see it, it is an opportunity for the former pupil to surpass his master. So, what’s your proposal to stick up all that pressing reforms up our rear-ends in the coming years?

    • Barreda,

      Shock therapy in post-war Germany? What are you talking about? Post-communist Poland?

      Those are two completely different kinds of fish. Germany was ruined, literally in ashes and everyone knew it and everyone, even a little child, knew why, the country went through a war and everyone saw the troops pass and the raids destroy city upon city. Millions were displaced, millions were prisoners…it was not about “ajustarse el cinturón”, it was something for anyone, even the most stupid, to see. Never mind you are talking about a population with a top education level, which also got an incredible help from the US Americans via the Marshall plan.

      Poland was also completely different. There was a whole long discussion about what was happening and where people – the vast majority – wanted to go: away from the Soviet occupation and towards Europe.
      Besides: why did it go so completely wrong in Russia and Ukraine?
      Because they blindly tried to apply “book rules” from people who had no clue about the special circumstances, because there was absolutely no rule of law and you cannot establish that overnight and because normal people did not know, unlike in Czechoslovakia or Poland, what to do with their shares on public property. Party power was transformed overnight into power to deal with huge state property rights and a wild feudalism ensued, something that did not happen in Poland.
      That is one of the reasons why Poland now has democracy and Russia does not.
      Lastly: both Czechoslovakia and Poland knew some form of capitalism, Russia had not (unless you call capitalism what they had with the Czars). Both Poland and Czechoslovakia and, of course, Germany, had a very direct feeling about wealth generation.

      Venezuelans haven’t got a clue and, as Miguel has said, no one has the cojones to teach Venezuelans. Venezuela went from being a feudal nation to being a nación rentista con mucho petróleo.

      Venezuelans are profoundly ignorant, but not idiots…and yet no one wants to tell them the truth. We still keep living our feudal El Dorado dream and think we are not rich because someone else is hiding Alfinger’s morocotas de oro under some tree.

      Uslar Pietri tried for more than half a century but the only thing people did was to print his “sembrar petróleo” in posters. We need to try different methods to present the message, to educate people about what is needed.
      Unfortunately, those who knew something were so disconnected with the lives of the Pedro Pérez and Julia Pacheco of Venezuela that they could not communicate with them and so the ones in the middle, with their vested interest of one kind or the other – the feudal lords, the importadores, the milicos and the extreme left – won.

    • Kepler,

      You’re right. Since then (ca. 1989), Shock Therapy has been proven wrong. Not only Russia, but also Argentina and several other countries suffered the consequences of such policies. But that came later. In 1989, economists didn’t know that, and at that time, it was known that market reform and price liberation helped depressed economies like that of Post-War Germany. If that worked like magic in a ruined country like Post-War Germany, why not give it a try in other places? Well, NOW we know it wasn’t that simple… Hindsight is always 20/20.

      And you posed the 64,000-lochas question: how are we going to persuade our happy-go-lucky country men and vested-interest groups that we have to tighten our belt? It looks like there’s no an easy answer to that.

      Education could work, but that may take a generation, and our economy cannot way that much….

      • I am not talking now about formal education, I am talking about an information programme. If the military and the FARC can go on for ages telling people crap about some Bolivar myth, why can’t we produce networks to tell people some ideology-free truths about what’s wrong with Venezuela and what is needed?
        And mind: we have to be careful about that part of “fastening the belt”…because simply put, people are always going to feel – with good reasons – that the ones who have to do that are only the poor workers, not the importers of luxury items, not the ones who have always been the closest to the government’s teats.

        • Your right! Competing self-interest leaves the poor to fend for themselves….creates instability and stagnation of future workers and consumers!

      • “You’re right. Since then (ca. 1989), Shock Therapy has been proven wrong. Not only Russia, but also Argentina and several other countries suffered the consequences of such policies.”

        Just to play devil’s advocate, shock therapy had quite a positive result in 1990’s Peru.

        Sure, the “Fujishock”, had a more significant impact on the lower economic strata, but the entire population felt the effect of the widespread reforms.

        No one can argue that this was shock therapy on steroids, but the results speak for themselves; it is simply unlikely that Peru would be in its current state had it not been for the stabilizing objective of Fujimori’s plan.

        Perhaps the difference is that the entire country understood that it was the only way out of complete economic / social destruction. The country was teetering on the brink of the abyss, dug hard, and came out on top.

  15. I also don’t think it’s fair to put the blame on Naim and his team, the IESA boys. The blame goes to the one that set up the team for conforming such an unbalanced team. All attack and no defennse. They were not communicators, they were not politicians, they were technocrats. To ask Naim to suddenly be a master politician on top of being a master economist, es pedirle peras al olmo. He was a young guy and he probably knew, deep down, that he wasn’t well suited to the post. He must have felt like fish out of water. But you cannot blame him for giving it a try, having been given the opportunity of a lifetime by a seasoned president.

    I’m sure they knew very well you can’t antagonize every sector of the public life. They probably just misscalculated the magnitude of the opposition they were going to face (for which they were ill equiped) and the lack of support they were going to receive from those that should’ve been on their side, starting with CAP, AD and the Media.

  16. Wonderful post ! Keep it up !

    I think it is true that “shock therapy for all, immediately” is a strategy which cannot work. It’s weakness is that it is an abstract formula invented elsewhere, and imposed on very real people who may or may not be able to withstand the losses imposed.

    But of all the comments, the one which rings truest to me is that of Daniel Duquenal, above, who points out that CAP ran as a populist, then immediately turned against the coalition whose support he had sought in the election. Outside agitators like Castro cannot creata caracazo unless there is a profound feeling of betrayal. To the extent that CAP’s post-election shock therapy was not reflected in his platform, there really WAS a betrayal.

    • You’ve hit the nail on the head, jeffry – “betrayal.” That’s pretty darn brilliant. Betrayal motivates people to want to end that government in any way they could. I wonder what the real betrayal was – whether it was the pocket issues that were affected by the paquetazo, or whether it was the human rights violations that followed El Caracazo.

  17. @Naim “People didn’t understand or accept that we had no alternative. You could make speeches, you could posture all you want, you could fret about the situation of the poor but, in the end, the reality is that we had no money.”

    No! Taking decisions and giving up powers based on that you have no choice is just a temporary accommodation for not wanting to give up powers. Instead of rearranging the powers in Venezuela, getting rid of the myth of a government sowing oil, they kept the powers of the government. Yes, now the government was not the rich uncle but, in everyone’s mind, it was still the uncle who controlled the riches to be… as clearly evidenced by what has happened later with the current chief. “Gran Viraje”… ha! There is only one “Unico Gran Viraje” possible in Venezuela and that was not the one.

    And to believe that any of the current candidates can make a difference without structural changes, is plain illusory.

    • “And to believe that any of the current candidates can make a difference without structural changes, is plain illusory.”

      Well, if Chavismo is an affliction, then shouldn’t ending it create an instant relief?

  18. Juan, FT, vaya mi aplauso for a heartfelt post. There a few things from that time that I remember. First is having thought “por primera vez hay alguien al frente del poder que está preparado para ejercerlo.” That, IMO, applied to CAP, and the IESA boys que lo acompañaban. Second, only CAP could have surrounded himself with such people. When you are a leader galactico, such as CAP, you don’t fear IESA boys, you don’t fear a cabinet of PhDs from the world’s best unis, absolutely convinced, as you are, that none of these people will cast a shadow on you. It follows that what “the people” may or may not think was not even an issue. Remarkably, especially for you two and by extension some of the readers of this blog, members of that rather small tribe of over educated Venezuelans, that time, that setting, creo que se fue para no volver. I don’t foresee any politicos in the current setting doing a milk round in these pages to fill future cabinet positions.

    Going forward though, what would you have done Juan had you been in Moises’ shoes? How would you have done it? But more importantly, in this discussion of shock therapy, is it not true, still to this day, that when you owe more than what you produce and are sitting on, sooner or later you’re going to have face the music? Hasta dónde se puede correr la arruga? If you know of a method of getting out of such a scenario, gradually, painlessly, where all parties involved are quite content about how *you* are meeting *their* demands, could you please point it out?

    • I don’t know what options we had. But I do know that this couldn’t have been the only choice.

    • “could you please point it out?”

      Making sure that those at the bottom are receiving enough income to stay above the poverty line… cash distribution.

      • Didn’t Hugo Chavez clear Venezuela’s debts to the World Bank and the IMF? That might be the place to get a big infusion of capital to start rebuilding infrastructure, agriculture, and manufacturing! Also, just putting a stop to military spending, political and so-called discretionary funds is going to release more money to move people into productive jobs. The reversal of capital flight and giving opportunity to entrepreneurs to build the economy can add a lot, too. Am I being too optimistic?

        • But, does IMF and World Bank monies still come with the same strings that introduced the shock doctrine in the first place?

          • Shock doctrine, whether locally imposed or IMF or WB imposed, with a guaranteed income greater than critical poverty for everyone is more acceptable, especially to the poor. Cash distribution would take the much of the shock out of the doctrine.

    • I don’t know about Juan, but what I remember was an incredible need for the laws on the books at the time to be fairly applied. The book, “Cuanto vale un Juez?” was no joke, unfortunately. There was (and probably still is) a price, in cash, for every judicial decision. The incredible amount of frustration generated by this “pay to play” justice we had(have) reached every level of society.

      Add in that each special interest group with money generally got their way at the expense of the every day Juan just added cream to the cake.

      So I were I CAP, I would have tried there for sure. Although, you’d probably need two presidential terms to flush out the HP’s.

      Secondly, and in parallel, RECADI. What a fount of corruption! I never heard of anyone getting ANY money out of RECADI without paying the piper. How much did those commissions add to the cost structure of imports? Add in the baksheesh you had to pay to actually get your stuff out of the port,and it starts to add up.

      As an example, I know that imported cars with a value of less than 22K MSRP paid zero duties, paid IVA and normal port and storage fees. Vehicles between 22K and 44K paid 10% duties, plus all the rest and anything above 44K paid 20% + +. Guess how many 35K cars magically came in at 0%+IVA? Guess how many cars paid “commissions” in order to leave the port quickly, before anything that wasn’t nailed down on them disappeared (radios, spare tires, tool kits, you name it, it disappeared)? The going rate was about 1K$.

      This is not even going into social inequalities and the way that people with no connections kept waiting for the day that their problems would be solved, at least partway.

      Torres, as usual, mentions cash distribution. No disrespect, Torres, but I am not sure back then they had enough to go that route, what with all the other pressures on the currency exchange regime. But it certainly wouldn’t have hurt to try!

    • Cash distribution you say Torres? In a setting where money had to be chased around different ministries to pay for wheat? Come on mate, get real.

      • Alek,

        Firstly, realize that it was during CAP II that I began making my proposal public, before chavez’s failed coup attempt. The group that met weekly even set a special guest presentation day for me to present with extended time. It was very real.

        Secondly, do the math. For cash distribution, you don’t need “surplus” money. Cash distribution is a more efficient method for distributing the *same* cash that the government receives. It works *best* for the poorest, not richest countries.

        Here’s a budget that was poked around a bit:

        + Ingreso petrolero ($12 millardos), saldo: 12 millardos
        + Ingreso por impuestos (13), saldo: 25
        – Eliminar pobreza crítica (10), saldo: 15
        – Deuda (5), saldo: 10
        – Instituciones publicas (4), saldo: 6
        – Fuerzas armadas (1), saldo: 5
        – Salarios (3), saldo: 2
        – Otro (2), saldo: 0

        With today’s oil income, it’s a nobrainer.

        • But that would mean for a technocrat having to accept that a normal citizen knows better of what to do with his money than the technocrat, and that goes completely against the technocratic business model.

          Have you ever seen an oil-cursed technocrat? They are all oil-blessed… there are only oil-cursed citizens!

          • Very true. Add to that their also having to accept that the money distributed through cash comes right back through taxation, so the money will still be there for spending.

        • But of course Torres, with today’s money is a no brainer! But back in the day, when there wasn’t money to even make bread? With a barrel of oil at, what, $20-$30, the piling debt, economy tanking, etc.?

          That is why I asked Juan what would he had done in Moises’ or indeed in CAP’s position *in the context of that time*. Juan fairly brought up hindsight, which we seem to get ever better at around here, but the truth was, there was a rather finite -and very small compared to today’s- amount of money whose use needed to be prioritised. In such a setting, cash distribution is not even a point worth discussing. I know I keep coming back to this example, but it’s as if your abasto is broke, and you’re going to start offering freebies -rather than meeting your financial obligations- with the meagre income you’ve got, in order to keep part of your customers happy. It doesn’t make sense in my opinion.

          In today’s circumstances, I’d say like you it’s a no brainer, bring it on!

          • @ Alex Boyd “But back in the day, when there wasn’t money to even make bread?”

            Yes and so then it was perhaps even more important to share out all the oil revenues, down to the last cent, so as to establish clearly that there was no more easy money from where that came from…

            CAP was elected on the basis of replicating the good feeling of an oil boom… without an oil boom.

          • Alek, my “nobrainer” comment was the least of what I replied to you. The rest of my comment was precisely about back in the day, with the barrel at low 20s. The presentation I mentioned was back in 96. And I had already been pushing the thing since 94. The cash distribution made sense THEN.

            Also, do the math. You seem to think that money given out in cash distribution disappears. It doesn’t. It comes back into government hands with a mere time lag.

            “In such a setting, cash distribution is not even a point worth discussing. ” You’re very wrong! It was in those tighter circumstances that cash distribution allowed for belt-tightening, economic/financial corrections while ensuring that no one –no one– fell under the critical poverty line.

            Since you want to see it in the abasto example, let’s take a look at it, but within the context of government spending. Let’s say the abasto has a tax debt, in a country in which the government gives cash distribution. The abasto pays its taxes, consumers come buy more stuff. Done. Let’s say the government does not have cash distribution. The abasto pays its taxes, comsumers don’t have money to buy stuff. The abasto goes broke. Done.

            Thinking of the country as an abasto fails to take into account the flux of money. A more proper analogy is the cycle of water. All the water runs to the ocean, then we can either bring the water from the ocean to certain places on land, but if we don’t take it to all places, we’ll have land that is too dry. If we let it rain everywhere, no land will be too dry. It is irrelevant, from the point of view of the ocean, whether it rains everywhere or just somehwere, since it runs back to the ocean anyway. It is also irrelevant whether it’s a little or a lot of rain, but note that it is in dry season that making sure no land is too dry that guarantees the land produces at its fullest.

            Cash distribution wasn’t just worth discussing, back then, it was the ticket to make the paquetazo swallowable, much like Quico’s proposal to increase gas prices through cash.

          • Torres, I know that the money given out does not disappear. What I find difficult to get my head around is this: if you’re in a compromised fiscal position with lenders it makes no sense to say “hey folks hang on, we will pay, but before that let me implement this neat cash distribution program with my receivables, so that the poor are happy with the austerity measures I will have to take to pay you, when a part of that money comes back in taxes, then I will be in a better position to meet my fisc…”

            Ergo, if you are to receive 100, and you owe 400, it makes no sense to say to those you owe money to “I will give away a large chunk of the 100, and with the tax that that shall bring back -which will always be marginal in comparison with total amount- I’ll repay the 400 I owe you.” No creditor is going to buy that mate, you wouldn’t buy it, I wouldn’t buy it, neither would the poor. Priorities need to be established. Juan mentioned the hipodromo. That’s where the cuts should have started. Cut all useless, money losing ventures, whether casinos, hipodromos, telecoms, whatever, free some cash and *that* cash you can then redistribute. What I think is not acceptable is to plan redistribution with receivables when said receivables are over stretched and already compromised. My two cents.

          • Alek, The whole point of the cash distribution system is that government is not only forced to cut the crap, like casinos, hipódromos, hoteles, and subsidios a gasolina, but to get rid of much of the corruption in all the things in which government was meddling.

            Until now you’ve talked about cash distribution as an additional spending, it’s not. It’s a saving. Cash distribution is what will let the government have the cash to pay the lenders.

            Perhaps where you fail to read me is, I’m not saying, let me distribute cash before I pay you, lenders. I’m saying let me stop paying for all this waste over here so that I can pay you, lenders, but to be able to do that without a Caracazo, I’ll be setting up a cash distribution system.

            From my perspective, it’s not the saved money that needs to be used for cash distribution, it’s the oil money that needs to be used for cash distribution, while paying the lenders from the taxation money. By setting up the cash distribution system, taxation money no longer needs to go to countless money pits disguised as social programs, like PDVAL. So the cash distribution is what frees up taxation money to pay the lenders. Honest lenders would see that.

            The thing is many lenders were part of the problem. Or why didn’t they mind my saying, let me pay casinos and hipódromos before I pay you, lenders?

            The key, then is to have the people and the consumer market taken care of before any other spending by government. Forcing that prioritization is achieved via cash distribution. The people can’t go hungry, and the market remains an active taxation engine. Everything else is the government’s problem, including explaining to lenders why it’s not paying them before paying for casinos and hotels.

            In the end, though, the money is fungible, so it doesn’t matter from where you claim to be saving to pay. The bottom line is cash distribution eliminates the shock at the level of the poor, preventing a Caracazo, saves money by preventing corruption so you’ll get rid of your debts faster, and lets you focus on other things, which makes you more efficient so you can pay debts faster.

            As you can see, cash distribution would have been the ticket for Naim’s policies, especially in the fiscal circumstances back then.

          • Note, too, that in the budget

            + Ingreso petrolero ($12 millardos), saldo: 12 millardos
            + Ingreso por impuestos (13), saldo: 25
            – Eliminar pobreza crítica (10), saldo: 15
            – Deuda (5), saldo: 10
            – Instituciones publicas (4), saldo: 6
            – Fuerzas armadas (1), saldo: 5
            – Salarios (3), saldo: 2
            – Otro (2), saldo: 0

            There is a line item for Deuda. The Lenders would have no problem with the other line items if you have 5 millardos, yearly, for them, there.

          • Alek, The whole point of the cash distribution system is that government is not only forced to cut the crap, like casinos, hipódromos, hoteles, and subsidios a gasolina, but to get rid of much of the corruption in all the things in which government was meddling.

            We are in agreement.

            Until now you’ve talked about cash distribution as an additional spending, it’s not. It’s a saving. Cash distribution is what will let the government have the cash to pay the lenders.

            It is, in the absence of it, an additional spending. It’s a saving in taxation, in eliminating corruption, though initially it’s a spending.

            Perhaps where you fail to read me is, I’m not saying, let me distribute cash before I pay you, lenders. I’m saying let me stop paying for all this waste over here so that I can pay you, lenders, but to be able to do that without a Caracazo, I’ll be setting up a cash distribution system.

            Lenders don’t give a flying toss about a Caracazo. You couldn’t possibly have know that a Caracazo was “en ciernes”. So that’s not a valid point.

            From my perspective, it’s not the saved money that needs to be used for cash distribution, it’s the oil money that needs to be used for cash distribution, while paying the lenders from the taxation money. By setting up the cash distribution system, taxation money no longer needs to go to countless money pits disguised as social programs, like PDVAL. So the cash distribution is what frees up taxation money to pay the lenders. Honest lenders would see that.

            What evidence there was, at the time, that through taxation of cash distribution you could meet your obligations with lenders? While I agree that oil money must be the source of cash transfers, I don’t see that was a viable alternative back then. It would have been much better to say “look, we are getting from the rich, and the corrupt, and the bookies, and os ruleteros, to give it to you…” With that money recovered from cutting all the crap/subsidies described, you could have *then* set up a cash distribution system, not as an additional expense. As per honest lenders, well…

            The thing is many lenders were part of the problem. Or why didn’t they mind my saying, let me pay casinos and hipódromos before I pay you, lenders?

            See final sentence in my previous paragraph.

            The key, then is to have the people and the consumer market taken care of before any other spending by government. Forcing that prioritization is achieved via cash distribution. The people can’t go hungry, and the market remains an active taxation engine. Everything else is the government’s problem, including explaining to lenders why it’s not paying them before paying for casinos and hotels.

            Difficult to disagree with that.

            In the end, though, the money is fungible, so it doesn’t matter from where you claim to be saving to pay. The bottom line is cash distribution eliminates the shock at the level of the poor, preventing a Caracazo, saves money by preventing corruption so you’ll get rid of your debts faster, and lets you focus on other things, which makes you more efficient so you can pay debts faster.

            In agreement.

            As you can see, cash distribution would have been the ticket for Naim’s policies, especially in the fiscal circumstances back then.

            I still refuse to accept that a cash distribution solution would have prevented what’s happened. There were, I am sure you’ll agree, many other factors at play. Many that we already know and many that we don’t. And this by no means is a blanket dismissal of what you propose, I just think that this monday-morning quarterbacking misses many things. As they say, talk is cheap, providing viable solutions is an entirely different kettle of fish.

          • “It is, in the absence of it, an additional spending. It’s a saving in taxation, in eliminating corruption, though initially it’s a spending.”

            Not in bookkeepping. It’s not a government spending because the money does not belong to it. It’s a form of theft. Forcing the government to distribute it is a savings because it will no longer have to spend on redundant social spending from taxation.

            “Lenders don’t give a flying toss about a Caracazo.”

            I think you’re wrong. Ask a lender.

            “What evidence there was, at the time, that through taxation of cash distribution you could meet your obligations with lenders?”

            See the budget. There’s a line item to meet the obligations.

            “I don’t see that was a viable alternative back then.”

            See the budget. It’s from back then.

            “Difficult to disagree with that.”

            “that” = cash distribution: forcing the taking care of poverty and market before any other spending.

            “I still refuse to accept that a cash distribution solution would have prevented what’s happened. There were, I am sure you’ll agree, many other factors at play.”

            I agree regarding the other factors. But at least the volatility due to poverty would have been diffused. I know that there were groups aiming to bring down CAP, and Caldera (when he did a 180 as well), and the plight of the poor was just an excuse. But eliminating that volatility should permit sufficient focus on the other factors to possibly diffuse them too.

            Philosophically, you’re right in that we can’t know what would have happened with any given change. But, pragmatically, we can predict, de anteojitos, that if you have 40% of the population near critical poverty, you can’t tighten their belts any futher without deaths in your hands, be it by violence, malnutrition, or disease. Naim washes himself of that. Cash distribution may not have prevented the Caracazo, but I haven’t read anything that would have been a better bet.

            “If you know of a method of getting out of such a scenario, gradually, painlessly, where all parties involved are quite content about how *you* are meeting *their* demands, could you please point it out?”

            The same applies now to beating chavez and fixing the economic mudpile we’re in. In the current situtation, as back then, there is no better bet than cash distribution. Anything else has a lower probability of success.

          • Torres, I am on your side, while our discussion remains in the realm of philosophy. In practice though, saying Naim could have done this or that, CAP could have prevented this or that, is, in my opinion, pretty darn useless, so late in the game. That CCT is the way forward, should have been implemented a long time ago, and is the most pragmatic, and sustainable policy to lift people out of poverty, I think it’s been proven already. However, and this is the issue with your initial comment, back in 1989, who knew? Who knew that an increase in pasajes was going to end up in El Caracazo? Ahh, hindsight, such a fantastic thing.

            Re lenders, I think there’s enough evidence, felt in almost every household around this earth, that lenders do not give a fuck. Dick Fuld proved the point quite well I guess.

          • Alek: “this is the issue with your initial comment, back in 1989, who knew?”

            Well, according to Naim, he knew things were going to blow. I wasn’t going to say anything until you asked, “Going forward though, what would you have done Juan had you been in Moises’ shoes?”

            My I reply was that cash transfers was an option, even –especially– back then. Cash transfers address all the issues so far mentioned, and then some. By “address”, I do not mean a “guaranteed” solution, but definitely a guaranteed improvement, and better than any other proposal. So though I cannot say the Caracazo or anything else may have been prevented, I can state with assurance that there was at least one option available at the time that was not attempted: Cash Transfers. An option that is still our best option today.

    • Arturo’s guide to troll Caracas Chronicles:

      Step 1: Find a post.
      Step 2: Wait until there’s a lot of comments.
      Step 3: Put a comment irrelevant to the theme discussed.
      Step 4: Wait for angry responses.
      Step 5: ????
      Step 6: PROFIT!

      Dude, you’re transparent. Stop pretending. Problem?

        • Awesome!

          Although now that “the cat is out of the bag”, as it were, we should expect to see similar applications in the “asymmetric warfare” model that Chavez loves.

          Is a Feline Militia in our future? Only time will tell………

  19. I think it really was a failure of populist posturing, what we saw.

    CAP could well have softened up public opinion with a series of searingly anti-Elite speeches about, for instance, how FatCat rich people were hogging all the cheap gasoline.

    He could have communicated that hiking the price of gas was a way to stick it to them.

    He could have ensured part of the extra resource stream from higher gas prices went straight to public transport subsidies.

    He could have stressed the way each subsidy he targetted ended up benefitting a pampered elite disproportionately.

    He could have positioned every decision he took within a broader narrative of NO MORE PRIVILEGES FOR THE POWERFUL FEW…

    He could have Chavez’d the way he presented the paquete.

    Instead, he couched it all in a technocratic registry that made no sense to normal people.

    • trying to sell that ending gas subsidies are a way to stick it to the rich is a tough job. Never mind if it´s true. But the way people are going to feel it in their pockets is going to tell them that no way, if anyone is getting screwed it´s them. The same with any other vested interest.

      I was living in Vzla at the time, and had just returned from getting a degree, and my impression at that time was that they were overconfident in the sense that they were right. They were sure that the trickle-down effect would compensate soon enough all those sacrifices, and that in the end they would be hailed as heroes. Once everything came crashing down they want to tell the story with a different twist. Now it is CAP II´s government that was sacrificed for the benefit of the country. But this is a modern twist. At the time none of them thought that this was a loosing battle. I don´t think that they were stupid enough not to feel that they had to sell the paquete in order for the government to last. They knew deep down that those measures were unpopular, but I think that they felt that the benefits would come much sooner, and that that would damp the revolutionary zest within the people, and in the end make everyone join the bandwagon. They miscalculated.

  20. Give Arturo some credit, at least this time he said he was OT.

    Usually if the author is Arturo, the comment is completely Off Topic and he does not say it.

    Great Comment Arturo! You are still a troll though.

  21. Inflation, ineffective price controls, tiered currency exchange, failed state companies bleeding the economy, subsidized imports, increasingly dire circumstances for the poor.. that all sounds eerily familiar.

    Juan and Quico, you may be in a position to give some advice to whomever wins in 2012

  22. There were some social support programs that came along El Paquetazo.

    At the time my father worked at a municipal school in Caracas, and I do remember some of those: vaso de leche escolar, uniformes y útiles escolares, hogares de cuidado diario, just to name the few I got to know.

    Yes, they are probably not as effective as cash transfers, and were somehow flawed, but it was not like the government was not trying to reduce some of the economic impact in low income families.

    About that idea of trying to sell the whole reform back then like a revenge against the well-accommodated and fat cats, that would have been completely illogical. It would have been the equivalent of throwing stones against his own house! All the fat cats and well-accommodated guys were a creation of the system. Those were the guys that gave financial support to the parties! Moreover, do not forget that until then, AD was a people’s party, i.e. workers, professionals and businessmen could identify themselves with the party. That was a part of the charm of AD. Recurring to a “class-struggle” discourse would have been something against the spirit of the party AND our democracy. I can see a leftist party doing that, but a social-democrat party? Even a populist guy like CAP was sensible enough not to go that way.

    You may argue that a liberal economic policy like El Paquetazo was also against the spirit of a social-democrat party like AD, but haven’t the other social-democrat parties around the world gone that way since then? They have paid the consequences, of course… It seems that social-democrats can’t have their cake and eat it too.

  23. I will risk a different explanation, against CW that there was a communication problem.

    To me, with privilege of age and hindsight, the policies and government intentions and actions were really well understood. By who? By special interests, who got the message clearly and acted accordingly. They won and tecnocrats lost. Special interest won and CAP lost.

    The general public, (as in Public Opinion), does not exist. What exists is people as part of special interests and in this case, the new government was going against almost any special interest group that existed. Thus the image of a very extended opposition throughout the country.

    Finally, this takes me to another point. Was there a conspiration? I don’t think so. Collusion (of special interests) would be more appropiate.

    • Well, I am with you in almost all but this: the general public does exist. Only that it is manipulated over and over and over and over again. It has always been, not just in Venezuela.

      What to do? I think we need open discussions, not in English or French or Sanskrit but in Spanish and not in Globovisión or the Internet but God know where in every one of the top 40 cities…discussions about all those interest groups. Knowledge about them, an open discussion about the need for pluralism and for further open REAL NON-FIGURATIVE debate will make that public more cautious and will make interest groups weaker.

      It is in our group’s interest to do this :-)

      • Ok. I confess I went a little overboard on the existence of the general public and public opinion. In any case, I think that special interest groups, especially when they co opt the State like they have done in Venezuela for many years, really don’t pay attention to the general public. In fact they are not moved by the general interest.

        I agree on meeting and having open discussions on special interests. There are many examples of overcoming them in several Latin American countries. And it is completely absurd that we still have horse racing as a government activity.

        Pongamosle fecha y lugar a las cosas.

        Saludos

          • When Antanas Mockus started to reform the public transportation system in Bogotá, he went against special interests. Pressure from the buseteros was big, with Transmilenio buses being even bombed, but he succeded.

            Back in the 80’s, a governor in the state of Ceara in Brazil started to open public procurement beyond the traditional big contractors. He also started to focus resources for farmers in a more thecnical way, exposing the many who were getting resources and not using them.

            But most of all, he started making public how much money the state allocated to the municipalities (Ceara has almost 200 municipalities). This was too much, even for his own party. But he kept going, because public opinion was now informed and backing him.

            Participatory budget in Porto Alegre is another example of exposing what is secret and in the hands of special interests.

            Going back to your letter to MN, I might say that one of the things they should have done differently was attacking special interest by exposing what is or was secret. It requires cojones and a deep conviction of what you are doing. Was CAP willing to do this, or was he risking being exposed too?

            Moreover, thinking about the future, is a new government willing to go against special interests by exposing what has always been secret? Will a President eliminate la partida secreta? Will a municipal government go against
            buseteros by taking charge of the public transportartion system? (Henry Falcon tried).

            Will a President or Mayor close the entry to Fuerte Tiuna at the end of the Panamericana that descends from los Altos Mirandinos, as it affects the collective and benefits just a special interest?

            Finally, will a government ever privatize the horse racing system?

            Special interest fighting will require going against your compañeritos de partido, but also against a deeply entrenched cultural element of what we have always called democracy. It will mean that you are willing to face blackmailing by special interest. Some (right, maybe the word many is too much) have done it.

          • OK, that was Antanas. Even if I think he is sometimes too much of a comeflor, I think he has done a lot for Colombia. I wish we had intellectuals like him in Venezuela. I don’t see them.

        • “I think that special interest groups, especially when they co opt the State like they have done in Venezuela for many years, really don’t pay attention to the general public.”

          An unfortunate fact of life in Venezuela, which was a part of its downfall into Chavismo bringing into play a payback scenario, except the co-opters largely escaped unscathed and some even kept on keepin’ on.

          • Yes. In most cases, you can change teh individual names, but the mechanisms remain the same and what you see is a fight for regaining/keeping the spot.

            Co option by special interests will always happen everywhere, but a country like Venezuela is specially vulnerable because the state is a big prize with a lot of resources. So, the temptation to distribute even what you don’t have, is much bigger. A sure recipe for special interests formation and growth.

            Which takes us to privatization issues and 1989 again…..

  24. I don’t exactly know how to say this, but I think political ideology and economic models are not so helpful when there are so many problems. Eventually, they have to take a back seat, and each problem has to be solved individually using whatever resources, tools, and people who are willing and ready to do the work.
    In my experience, over 40 years worth, identifying the problems has always been the hardest thing to do. However, it is necessary to do if you are going to find a solution. Political ideology, philosophy, etc. only serve as obstacles to seeing how things really are and what to do about them.
    What I found to be most effective is to do whatever it takes to get a consensus to do something, whether it works or not. However, everyone must be willing to look critically at the progress and be accountable for the results. That is the most important, and that is what doesn’t exist in Venezuela among those in power right now.

    • I need to make a correction. Actually finding problems are easy. Finding the “cause” of the problem is the hardest thing to do, but it necessary to find the solution.

    • “Political ideology, philosophy, etc. only serve as obstacles to seeing how things really are and what to do about them.”

      The way I see it, an ideology is the hypothesis in which you base your reasoning to analyze the world, formulate an explanation and try to solve its problems. They are not bad per se. Of course, there are a few that are useless and should be discarded from the beginning. Communism? That’s a no go. Period. But to say that each and everyone of them is wrong, that’s a bit exaggerated.

      “What I found to be most effective is to do whatever it takes to get a consensus to do something, whether it works or not. ”

      Well, that’s what politics are for: sit people with competing interests on the table and get them talking in order to avoid violent conflict. Our problem is, that our system doesn’t work. Our presidential system – our Taita-State if you will – in which the President is the ultimate decider, is being used by Chávez to take away the possibility of pacific conflict resolution. The National Assembly has lost its relevancy – if it had one before – and the media is not working as an even passable substitute.

      Whatever happens in 2012, we should be thinking about stripping the Presidency of some of its powers. We should turn the legislative bodies and the media into places where we can sit and talk our way out of problems and differences.

      Some common sense wouldn’t hurt. We have had enough hysteria for the rest of the XXI century!

      • We should be transforming Venezuela into a parliamentarian system perhaps…the German system with its 5% threshold (to avoid mini-parties) and strong federal model would be nice…and with a state media that is NOT government media.
        I can only dream. But then not even “politics specialists” mentioned term limits IS needed in presidential systems, unlike parliamentary systems.

        The president or head of state – this should be something feasable even now – should be forced to give answers, in real time, to the parliament on a REGULAR basis.
        Imagine Chávez being question every 6 months by the Asamblea Nacional.

        • Yes, let’s strip the president (and by extension the whole Executive power at national, regional and local levels) of some powers. Let’s also make them accountable. And let’s make that public.

  25. @David Figuera “Which takes us to privatization issues and 1989 again…..”

    Wrong! It should take us to oil revenue sharing for the first time

    • Per

      Yes! That is my wish.

      What I tried to say was that given the fact that being the Venezuelan state a big prize because of the resources it has, because of oil, then I guess discussing how to face it’s being co opted by special interest would take us to a talk on the oil industry privatization as one of the ways of stripping that state of superpowers. Are there alternatives for dealing with these kind of resources? No doubt.

      I don’t doubt either that the contrary in this public debate will still call any option “privatization”. My point here is that in any case, being the state so powerful, special interests form and grow much more.

  26. What I’m saying is that SOLVING the problems is more important than HOW the problem is solved. In my opinion the philosophical and ideological battles are focused most on the HOW and there is no accountability or ability to change course when there is no progress.

    One other thing I notice, is that in spite of which ideological position, there are going to be crooks and greed that take advantage. There seems to be so much of that in Venezuelan history. There has too be high ethical standards and some way to inforce them free of politics. The focus has too be on what serves the common good and how to get out of the current morass. That shouldn’t be but will be a political nightmare to get through. I have some ideas.

  27. Here is one idea: there might be some mechanisms established to refer complaints to nonsectarian review boards. Universities, for example, should be setting the highest standards for science, engineering, professional competences, and academics should have protections through tenure, and they should be willing to establish review boards that can deliberate and provide opinions to the AN.

    Universities are held to a high standard by the students themselves.

    • Universities?
      This really puzzles me. I went to university in Venezuela. I went to university in Europe. I have worked at university level in Europe. My dad was a professor. University is definitely NOT something alien to me.

      And yet:
      this obsession with universities in Venezuela is killing me.
      This comes from both the alternative forces and the Chavez supporters. “Licenciado, ingeniero, doctor”.
      The average Venezuelan is no more stupid or intelligent than anyone else but he is a functional illiterate, his maths skills are the lowest in Latin America. You firstly have to get the average population at a certain level. This is below Bolivia, guys.

      For me it’s fine if universities increase their standards, professors and workers become more efficient, if we end up the HORRIBLE mafia there is and has always being because of the student quotas to the Centros de estudiantes and to workers and professors. But firstly we need to bring about accountability and transparency to free education in BASIC and SECONDARY school. Everything else is a complete waste of time, we won’t keep up with anything unless we tackle that absolutely first. As long as we don’t do that, we will focus on universities and don’t grasp why there are masses who think universities just do not want to let them in, universities themselves will waste a lot of efforts in trying to “select” or fix what should have been fixed many years earlier.

  28. The problem is that when truth speaks to power, the pueblo can’t distinguish which is truth, the courts see them as conflicting opinions between experts that disagree, the press are perceived as biased. There needs to be some entity to serve as a trusted arbiter.
    What would that be?

  29. My favorite part is that you oppos always claim that you are not supporters of neoliberalism, yet you are admirers of Moises Naim. It couldn’t be more obvious what the oppo plan is for Venezuela.

  30. I wonder how many times neoliberalism has to fail in Latin America before the Venezuelan opposition stops advocating for it and admiring the technocrats that tried to impose it upon the country?

  31. Dear Juan:
    A quick (and belated) note on the odd spectacle of the entrenched power elite trying to act the populist. I remember when Franklin D. Roosevelt wooed the poor, and stole the gold from the rich. He may have made the depression a lot worse, but few thought so at the time, least of all 10-yr-old me.

    Moral: it’s quite practical for anyone to preach populism, even in a tuxedo with a long golden cigaratte holder. The only thing to fear- as someone said once – is your fear of doing it…

    ;-)

    Best,

    Deedle

  32. Another great post guys. Well done.

    Roberto N took the words right out of my mouth with the all-too-common phrase from the time:

    “All those bastards steal, but with CAP we’ll have some left over for us to steal too”.

    This, right here, was the self-destructive mentality of middle and high class Venezuelans from the so-called IV Republic; a mentality which through a fluke of chance has managed to survive all these years. For this reason, each time I engage in political debates, I remind all that Chavismo is not the cause of our social, economic, cultural, democratic demise, but the result of it.

    As it’s often the case with macroeconomic reform, it makes good sense on paper. But ignoring the social impact of the resulting measures is without fail a recipe for disaster. The main problem with CAP’s economic reform was that it bit the hand that fed him and threatened the petrostate policy that made the elite rich. Whether by accident, design, or imposition by the IMF, the measures threatened the very fabric of what Venezuela (and Venezuelans) had become. Sound economic measures often result in political suicide.

    CAP, a self-proclaimed socialist (and without a doubt, a revolutionary), lost support from his peers and the elite when their “racket” was threatened by his change of heart and his new policies. This caused him to lose support from the people when he began to break his presidential promises. Hugo Chavez has broken many promises, but as opposed to CAP, he has the luxury to wait for his voters to forget what the promises were and adapt to their new circumstances.

    In a business-oriented government such as ours in the 80’s and 90’s, short changing your voters was risky, but survivable. What was not survivable for a president was to short change his contributors and party members, which is precisely what CAP did.

    The justification for breaking presidential promises matters not to the common folk, so the Caracazo was unavoidable in my opinion. As Quico (or was it Juan) once put it, to the poor, eating 1 arepa today beats eating 1.2 arepas tomorrow.

    The promises broken by our current government far outdo those of any previous mandate, but as long as enough people get their “fish” and are fed for “a day”, the Chavez regime will not be at risk of imploding. While learning how to fish is certainly the way to a more sustainable lifestyle, why would anyone fish at all when Don Chepe (as in la novela Por Estas Calles) is handing out free tuna? Sure, the tuna is expired and everyone knows it, but it beats walking down to the river and doing the fishing themselves.

    As Winston Churchill adequately put it, “Socialism is a philosophy of failure, the creed of ignorance, the gospel of envy. Its inherent virtue is the equal sharing of misery.”

    The only thing that can bring down the Chavez Government is Hugo Chavez himself. Unfortunately, as overachiever as he might be, he has failed at that too, just as our nation has failed to recognize why the revolution even took place.

Comments are closed.