Correcting Tim Worstall of Forbes on Venezuelan Food Shortages

Preface: A few days ago I began an exchange with Tim Worstall over his article on Forbes regarding the food shortages in Venezuela. I noted that his work did not include an explanation for the shortages, nor did it acknowledge the economic warfare going on in the country. He simply refused to admit there was imperialist tampering in the country. So I’d like to respond to him here in detail.

During late 2015 to mid 2016 there was a crisis of food shortages in Venezuela. The pro-imperialist media hailed this as proof of the failure of “socialism.” Important to note is that Venezuela isn’t socialist, it’s social democratic. Images of long lines are posted in the media by U.S. outlets claiming that people are starving in the country and that there is soon going to be mass starvation.[i] U.S. think tanks are on a war path producing disinformation aimed manipulating public opinion.[ii] The goal is to collapse the Bolivarian Revolution and allow U.S. imperialism to gain a firm footing in the country (and the oil reserves) once again.

No doubt there is a food crisis in the country. But, it is not, however, being reported honestly. The causes are far from what is being claimed. Simple mindedly, socialism as a system in general is being blamed. Low brow explanations given are basically “they always run out of other people’s money.”[iii] Those that bother to look for an actual explanation are met with claims such as: “a significant portion of the oil revenues was simply stolen.” Of course, Cato Institute’s Juan Carlos Hidalgo gives no actual explanation of how this caused food shortages.

Other sources claim that the government just let the production of food fall. Interestingly, they don’t provide anything to demonstrate this.[iv] The reason is because they can’t. The majority of food is actually imported from other countries. There’s a very good reason why this is the case. Venezuela has been held as a “single commodity economy.” Their whole thing is dependent upon oil, not much else is actually produced in the country – instead it’s imported. This is the way the country was set up by U.S. imperialism. If at any point the country tries to get out from under U.S. control, they can simply embargo them, or ruin the price of their single commodity export. This allows the U.S. to discipline the country, forcing it to serve the interests of imperialism. This is not uncommon for many developing countries placed under imperialist pressure. This is particularly the case for Caribbean and Latin American countries.[v]

These falsehoods are produced deliberately to slander the Bolivarian Revolution. It should be noted that these shortages only affect the poorer areas. Wealthier areas of Venezuela are fully stocked and customers are happy. This has come to light from a man, Agustin Otxotorena, a Basque executive living in Caracas. He showed pictures of his wealthy area with plenty of food.[vi] His photos which were published on various social media were instantly denounced as “fake” by the anti-Venezuela online community. The pictures were outright ignored in the imperialist media.

Since the history of imperialism in Venezuela has forced a neglect of other industry, it’s exacerbating the problems it faces now. The current president Nicholas Maduro has already called for changes in the economy to include necessary goods. “The Bolivarian Economic Agenda has several branches, the first is urgently address the crisis, another one is lay the foundations for the new economy, our country must find the accurate road to national development, looking for exits in complicated times and searching ways out of the pit where we fell due to the neoliberal model,”[vii] he said. The new policy involves a “special centralized plan, which favors domestic production and stimulate[sic] both national small and medium industry, and the social economy.”[viii] This move could take quite a while to bring into full swing.

So what’s causing the shortage itself? The culprits are the large grocery chains and importers which remain in the hands of the capitalist class. The weapon they are using is the multiple exchange rates. Essentially, this conversion of Bolívars into USD facilitates the great import scam by the bourgeoisie. Currency manipulation is being used side-by-side with falsehoods about the importation of food.

The scam works like this:

There are multiple exchange rates in Venezuela that convert the Bolívar to U.S. dollars. The idea was to give a preferential exchange rate to importers so that they could purchase imports more easily. This preferential exchange rate, and the growing gap in exchange rates, is what is allowing large retail businesses and importers to cause the shortage.

When a company wants to import essential goods, i.e. food, in this case, they’re required to go to the central bank to purchase U.S. dollars at the “preferential rate for necessary imports.” The rate is about 6.3 Bolívars to the U.S. dollar. (Current figures put it around 10 Bolívars.) The company then gives those USDs to whomever they wish to import from. Alongside this exchange rate is the “illegal parallel market rate.” This rate is set at 500 Bolívars to the U.S. dollar. This difference is where the scam takes place.

A private importer goes to the central bank and requests to exchange Bolivars for USD.

To do this, he claims he purchased 100 cases of groceries for 1000$ USD.

In actuality, he purchased only 50 of them.

The 50 he did import, he sells to businesses at the “illegal parallel market rate.” Each case cost him 10$ USD or 63 Bolivars, but he can sell each one at 5000 Bolivars due to the parallel rate. This massively inflates the price of necessary goods, while allowing the importer to pocket a gigantic profit. So what about the other 500 USD? Usually the importer will exchange those U.S. dollars at the “illegal parallel market rate” for 250,000.

In many cases the importer doesn’t exchange the left over Bolívars into USD. Instead, they take the money overseas for investment, or they place it in a hidden account. In other cases, they take the whole $1,000 USD and move it to an offshore account. Doing this on a large scale has caused a currency flight from the country. The amount estimated for this loss is around 300 billion Bolívars between 2003 and 2016. Pro-imperialist media claim that this money has been stolen by corrupt officials.[ix] However, it is far more plausible that this money has been taken out of the country by the economic elite of the country who have been allowed to remain. How much is $300 billion? It’s greater than the GDP of many countries around the world.

Country

GDP (Millions of US$)[x]

Finland 272,217
Pakistan 243,632
Ireland 238,020
Greece 235,574
Portugal 230,117
Iraq 223,500
New Zealand 199,970

This is the kind of economic sabotage that Venezuela is facing from the actions of the capitalist class. Not only are the economic elite siphoning vast amounts money out of the economy, but they’re inflating the prices of essential goods well beyond what they should be. Next time this subject comes up, ask an opponent of the Bolívarian government to explain why prices are so high, and supply is so low. Almost always they won’t give you an answer, other than to say that it’s the fault of socialism.

It is only possible to carry out this scam because there are multiple exchange rates. The policy is absolutely wrong. I’m not even sure what they were trying to accomplish with it. In this case, I blame the Venezuelan government for not having nationalized the import industry and grocery stores; and I blame them for having an ineffective exchange rate policy.

Notes:

[i] Gladstone, R. (2016, May 27). How Venezuela Fell Into Crisis, and What Could Happen Next. New York Times. Retrieved July 19, 2016, from http://www.nytimes.com/2016/05/28/world/americas/venezuela-crisis-what-next.html

[ii] Hidalgo, J.C. (2016, February 29.) Socialism Has Created a Humanitarian Disaster in Venezuela. Cato Institute. Retrieved July 19, 2016, from http://www.cato.org/publications/commentary/socialism-has-created-humanitarian-disaster-venezuela

[iii] Ibid.

[iv] Worstall, T. (2016, July 17.) Congratulations To Bolivarian Socialism – 35,000 Venezuelans Leave The Country To Feed Themselves. Forbes Online. 20 July 2016, from http://www.forbes.com/sites/timworstall/2016/07/17/congratulations-to-bolivarian-socialism-35000-venezuelans-leave-the-country-to-feed-themselves/

[v] “Dependence on Single Agricultural Commodity Exports in Developing Countries: Magnitude and Trends.” Food and Agriculture Organization of the United Nations. Retrieved  11 Feb. 2002. Web. 20 July 2016.

[vi] “Rich Eating Well in Venezuela, Basque Executive Shows.” TeleSUR. N.p., 31 May 2016. Web. 20 July 2016.

[vii] “President Maduro: Economic actions taken by the nation should have the human being as center”. AVN/ Prensa-Embajada de la República Bolivariana de Venezuela. (21 January 2016)

[viii] Ibid.

[ix] Hidalgo, J.C. (2016, February 29.)

[x] “GDP (current US$)” World Development Indicators. World Bank. Retrieved 21 July 2016. http://databank.worldbank.org/data/download/GDP.pdf

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11 thoughts on “Correcting Tim Worstall of Forbes on Venezuelan Food Shortages

  1. Thanks for this blog post regarding Venezuela; I really enjoyed it and am definitely recommending this blog to my friends and family. I’m a 15 year old with a blog on finance and economics at shreysfinanceblog.com, and would really appreciate it if you could read and comment on some of my articles, and perhaps follow, reblog and share some of my posts on social media. Thanks again for this fantastic post.

  2. So, if all this is the fault of the “capitalist class” then why do government-run grocery chains have even less food than the private ones? Why is the agricultural land that was expropriated and redistributed to the people now fallow and unproductive? And finally, why do you suppose the Maduro government has done nothing to change the idiotic exchange rate system left in place by Chavez, even when it is the cause of so much malfeasance? Could it be because his own cronies are the ones profiting from it? They are the ones getting the preferential exchange rate after all.

    • As I stated in the post, the import companies are falsely reporting the numbers. This is also why I criticize them for not nationalizing the import industry given their historical high reliance on it. Moreover, in the post, I also criticized them for the nonsensical exchange rates. It doesn’t appear as though you read the post. Your accusation of a preferential exchange rate for certain government officials doesn’t make any sense. Where is this exchange rate certain government officials are using?

  3. I have a couple of questions for the author of this article.

    You start the article by saying “During late 2015 to mid 2016 there was a crisis of food shortages in Venezuela.” Does this mean there are no food shortages anymore?

    You mentioned that Venezuela only produces oil which they export, and that everything else is imported. You also wrote “Since the history of imperialism in Venezuela has forced a neglect of other industry”. Venezuela has never produced anything other than oil?

    In the article you talk about how importers go to the central bank to obtain US$ in order to import. Do you know how the assignment process of those monies works? I guess what I’m asking is, any importer can go to the central bank and exchange bolivares for US$ for imports? or how does it work?

    Where can I find the different currency exchange rates Venezuela has for the US$ and euro?

    Do you know if the Venezuelan government has audit the importing companies in relation to the money exchanged and the amount of good imported?

    Is not very clear how supermarkets in poor neighborhoods have no food and rich neighborhood ones do. Can lower class individuals go to into rich neighborhood supermarkets or they are banned?

    Do you know where I can find more information about this subject?

    Thank you

    • 1. That line is part of a book that I’m working on referring to a specific period.

      2.”You mentioned that Venezuela only produces oil which they export, and that everything else is imported. ” I made no such statement.

      3. Most of the rest of these questions can be answered with a Google search.

      4. “Is not very clear how supermarkets in poor neighborhoods have no food and rich neighborhood ones do. Can lower class individuals go to into rich neighborhood supermarkets or they are banned?” They’re far away from the poorer areas restricting access. The point of the economic attack is to incite the poor. The rich are not too interested in hurting themselves.

  4. Good article; it’s important to point out the bourgeois media’s distortions, especially when it comes to anti-imperialist countries. The only thing that seemed odd to me was how you say that 300 billion Bolívars were stolen, but then imply that the equivalent of 300 billion USD was stolen. I don’t believe that any of the exchange rates, official or black market, give a 1:1 ratio between the currencies; I suppose it was just a simple mistake. But regardless, your main point of how most of Venezuela’s crisis is due to capitalism-imperialism still stands.

    • How does “capitalism-imperialism” hold the responsibility for Venezuela’s problems or that of any other Caribbean or Latin American country? The people of these countries need to look in the mirror to see who is responsible for their problems. The US government has given the continent of South America a road system, a major component of an infrastructure that could have led to economic growth for the entire continent save for the culture of South Americans themselves. They see governmental office as a reward which entitles them to graft and they wield the power of those offices to their own advantage.

      The truth is, food shortages in Venezuela are the result of Hugo Chavez’s hate-America-to-get-my-people-to-rally-around-me rhetoric that diverted attention away from his own pathetic performance. He is preaching hate America while he is stealing from his own citizens. Pick a Caribbean or Latin American country and see that scenario repeated ad nauseam for generations. American companies who operated in those countries left schools, hospitals, housing and equipment in all of them when they were either nationalized or left willingly. They gave free education to their workers’ children, a huge boost not only to those individual families but to their local communities.

      Before Venezuela found their oil, what did they do? Was a Venezuela a prosperous, peaceful, bountiful land filled with well-fed, happy people before the American oil companies financed the establishment of the oil industry there?

      Why have these food shortages lasted so long? Why hasn’t the international community helped these people? Why have dozens of zoo animals been allowed to starve? Does no one in Venezuela have enough empathy for other living beings to bring the plight of those helpless animals to the world’s attention? Instead of hating America and blaming us for all your problems, how about taking some action to change your own circumstances? Have you petitioned the UN and NGOs for help? I haven’t seen anyone on any US talk shows – are you even on Telemundo and Univision? Latinos love to brag how they “take care of our own.” I don’t see that happening.

      Instead of these senseless back and forth esoteric essays about who is right about how this happened, why not buckle down and take action to relieve people’s stress and suffering and that of the animals, and then you can exchange your useless academic tirades and stroke your egos.

      • Perhaps if you’d take a moment to research colonialism, or even the recent history of imperialism then you’d know the answer to the quest you weren’t really asking. Are you to assume that the U.S. overthrow of countries in Latin America and the Caribbean never happened?

  5. Greate Job Jason!
    The bourgeoisie in diying in Venezuela and it´s making pathetic strategies to survive.
    I live in México and food shortages are a more specific and focused on one or two very basic products.
    This actions are done by hidding huge amounts of these products to make the price in the marke rise and sell it far more expensive.
    And guess who can accumulate this amounts of basic products?
    Yes
    The bourgeoisie.

    Greate Job Jason!
    The bourgeoisie is dying in Venezuela and it’s making pathetic strategies to survive.
    I live in México and food shortages often occur in a more specific and focused way on one or two very basic products.
    This actions are made by hiding huge amounts of these products to scale the prices and then sell it far more expensive.
    And guess who can accumulate these tremendous amounts of basic products?
    Yes
    The bourgeoisie.
    Most of the media in México are controled by the bourgeoisie but sometimes the reality comes out. An example:
    “Cargill señalada como una de las principales responsables del alza al precio de la tortilla, compró y almacenó 600 mil toneladas de maíz de Sinaloa a mil 650 pesos la tonelada, que meses después vendió en 3 mil 500 pesos.”*
    600,000 tons of corn purchased, stored for months and sold with an illegal revenue of 1,110,000,000 mexican pesos.

    * http://www.jornada.unam.mx/2007/01/30/index.php?section=opinion&article=021a1pol

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