Caracas Chronicles

I just got back from a short trip to Maracaibo.

One of the many things that struck me (more on that in future posts) is the extent to which the enchufados hold the key to Venezuela’s future. I don’t know if it was the fact that I was in a border town overrun by pimpineros, bachaqueros, and other assorted –eros, but I had never fully grasped the extent to which the country’s economic policies respond to the needs to distribute rents to the various cronies living off the government.

Economic distortions are there not because of ideology, but because doing away with them threatens the very people that sustain this weak government. I discuss it some more in FP’s Transitions blog. The value added:

Enchufados play an important role in Venezuela’s power dynamics. Many of the government’s nonsensical economic policies are made to ensure they continue reaping the rents from their positions of power — and stay out of the government’s hair. All of Venezuela’s distortions benefit someone, and with the government’s plummeting popularity weakening its grip, it needs to keep these power players happy.

Distortions keep bureaucrats busy collecting bribes and reaping the benefits of their power. The rents public employees collect “on the side” keep them off the streets, where they would normally be protesting against their low wages. Likewise, the benefits from the black market keep the military happy. And business people making money off of the government are less likely to conspire against it. Add all this up and it becomes unlikely the government will eliminate currency or price controls: They may be causing scarcity, but they are needed in order to keep the enchufados happy.