Tuesday, September 14, 2010

As Cuba Admits Failure, Venezuela Continues Its Economic Death Spiral

The pain in the eyes of the Venezuelans I see these days is more palpable and more real than the concern across their faces as early as last fall, when I began visiting clients in Caracas and discussing the EB-5 immigrant investor "just in case" Plan B option.  While there has been a steady and growing concern that Mr. Chavez' continued mismanagement of this resource-rich paradise would lead to ruin, the reality of being the world's 8th largest petroleum producer seemed to provide some sort of invisible credibility forcefield.  If I heard it once, I heard it a thousand times: "If it wasn't for the oil revenues, [fill in the catastrophe of your choice]"...

Well, the shields are down, my friends, and it is heartbreaking to see the cold statistics.  For a great detailed article on just how ugly things have gotten, click HERE, but here's the nitty gritty:

-the Economist's most recent report
forecasts that gross domestic product in Venezuela will decline by 5.5 percent in 2010. Next worst
is Greece, with a 3.9 percent decline. Analysts at Morgan
Stanley worry th
at Venezuela is moving toward debt default...like Greece.

-GDP is expected to fall by 6.2 percent in 2010.

-Inflation, where Venezuela sets the current international standard: consumer prices are already up 31 percent for 2010 and
are expected to rise more by year-end. Only two of the remaining 56
nations monitored by the Economist are suffering double-digit inflation: India and Egypt, both with 11 percent price increases.

-Crime: Caracas now has
nine times the homicides per 100,000 people as Bogota and 15 times the
rate of Sao Paulo. Overall, according to Newsweek,
Venezuela has “the worst murder rate in the hemisphere”

-Retail sales were
down 12 percent in the first half of the year; sales of food,
beverages, and tobacco in specialty stores were off 30 percent.

I still remember visiting Venezuela as a little boy and seeing the splendor and comfort with which my uncle, a middle manager for Owens-Illinois (the U.S. packaging company), lived in Valencia.  Like so many Cubans who saw their lives, their properties, and their culture disemboweled via expropriation by a dictator, today's Venezuelans are witnessing the very same process...courtesy of their democratically elected president.

Let's hope that on Sept. 26 Venezuelans seize the opportunity to tell Mr. Chavez that they've had enough of his leadership.



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