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Ken Rogoff Exposes The Regional Costs Of Venezuela's Collapse
09-05-2018, 08:09 PM,
Ken Rogoff Exposes The Regional Costs Of Venezuela's Collapse
Ken Rogoff Exposes The Regional Costs Of Venezuela's Collapse

<p><a href=""><em>Authored by Ken Rogoff via Project Syndicate,</em></a></p>

<p><em><strong>The refugee crisis generated by the country's economic implosion is comparable to that in Europe in 2015.</strong> In response, US President Donald Trump has floated the idea of military intervention, when <strong>what the US should be doing is increasing financial and logistical aid to Venezuela's neighbors.</strong></em></p>

<p><a data-image-external-href="" data-image-href="/sites/default/files/inline-images/86af02e43946583ee8088ec2b5ef8c10.2-1-super.1.jpg?itok=CZv2zP7c" data-link-option="0" href=""><img data-entity-type="file" data-entity-uuid="22f2219d-902e-441e-b66b-c1878cf7d528" data-responsive-image-style="inline_images" height="250" width="500" srcset=" 1x" src="" alt="" typeof="foaf:Image" /></a></p>

<p><strong>As Venezuela’s great experiment with “Bolivarian” socialism implodes, it is creating a humanitarian and refugee crisis </strong>comparable to Europe in 2015. Traveling by bus, boat, and even on foot through treacherous terrain, around one million Venezuelans have fled to Colombia alone, and <a href="">another two million</a> are estimated to be in other, mostly neighboring, countries.</p>

<p>There, they often<strong> live in desperately unsafe conditions with little food and no medicine</strong>, sleeping anywhere they can. So far, there are no United Nations refugee camps, only modest aid from religious organizations and other NGOs.<strong> Hunger and disease are rampant.</strong></p>

<p>By and large, <strong>Colombia is doing its best to help,</strong> providing care to those who show up at hospitals. And its large informal economy is absorbing many refugees as workers. <strong>But with a <em>per capita </em>GDP of only around $6,000 (compared to $60,000 for the United States), Colombia’s resources are limited. </strong>And the government must also urgently reintegrate some 25,000 FARC guerillas and their families under the terms of the 2016 peace treaty that ended a half-century of brutal civil war.</p>

<p>Colombians have been sympathetic to their neighbors in part because<strong> many remember that during the FARC insurgency and related drug wars, Venezuela absorbed hundreds of thousands of Colombian refugees</strong>. Moreover, during Venezuela’s boom years, when oil prices were high, and the socialist regime had not yet decimated production, several million Colombians were able to find work in Venezuela.</p>

<p><strong>But the recent tsunami of Venezuelan refugees is causing massive problems for Colombia,</strong> beyond the direct costs of policing, ensuring urgent medical care, and providing other services. In particular, the influx of Venezuelan labor has<strong> put significant downward pressure on wages in Colombia’s informal sector</strong> (including agriculture, services, and small manufacturing business) – and just when the government was hoping to raise the minimum wage.</p>

<p>The first waves of Venezuelans included many skilled workers (for example, chefs and limousine drivers) who could reasonably hope to find gainful employment quickly. But <u><strong>more recent refugees have been predominantly uneducated and unskilled, complicating the government’s efforts to improve the lot of Colombia’s own underclass.</strong></u></p>

<p>The long-term problems may be even more severe, with diseases that were once under control, such as <a href="">measles</a> and <a href="">AIDS</a>, running rampant among the refugee population, which intermingles easily with the culturally similar Colombians. More forward-looking Colombian leaders, including the new president, Iván Duque, argue privately that <strong>humane and decent treatment of Venezuelan refugees will benefit Colombia in the long run,</strong> after the regime falls and Venezuela again becomes one of Colombia’s largest trading partners. But no one knows when that will come.</p>

<p>What is known is that after many years of catastrophic economy policy, starting under the late president, Hugo Chávez, and continuing under his successor, Nicolás Maduro, <strong>Venezuela’s regime has squandered an inheritance that includes some of the world’s largest proven oil reserves</strong>. The country’s income has collapsed by a third, inflation is on track to hit one million percent, and millions are starving in a country that ought to be reasonably well off.</p>

<p>One might think there would be a revolution, but <strong>so far Maduro has been able to keep the military on the regime’s side in part by granting it license to run a massive drug-trafficking operation that exports cocaine around the world,</strong> particularly to Europe and the Middle East. And, unlike oil exports, which are encumbered by massive debts to China and others, <strong>the proceeds from the illegal drug exports are by nature unencumbered, except in rare instances of seizure.</strong></p>

<p><strong><a data-image-external-href="" data-image-href="/sites/default/files/inline-images/h_53606272.jpg?itok=zKFGrYXE" data-link-option="0" href=""><img data-entity-type="file" data-entity-uuid="9a0a621d-6214-481c-92ca-48b0e4b851a5" data-responsive-image-style="inline_images" height="278" width="500" srcset=" 1x" src="" alt="" typeof="foaf:Image" /></a></strong></p>

<p>Sadly, <u><strong>many on the left around the world (for example, British opposition leader Jeremy Corbyn) were willing to turn a blind eye to the brewing disaster, owing, perhaps, to a knee-jerk impulse to defend their socialist brethren.</strong></u> Or, worse, perhaps they <a href="">actually believed</a> in the chavista economic model.</p>

<p><strong>Altogether too many left-leaning economists (including <a href="">some</a> who ultimately worked on the 2016 presidential campaign of Senator Bernie Sanders in the US) were diehard supporters of the Venezuelan regime.</strong> There were also opportunistic enablers, including Goldman Sachs (with its ill-considered <a href="">purchase</a> that propped up Venezuelan bond prices), and some on the right, such as the inauguration committee for US President Donald Trump, which <a href="">accepted a large donation</a> from Citgo, the US-based subsidiary of Venezuelan oil company Petróleos de Venezuela.</p>

<p><strong>In recent weeks, Maduro has put in place a half-baked plan to stabilize the currency,</strong> issuing new bills supposedly backed by the government’s cryptocurrency, which is like building a house of cards on a garbage dump. Whether or not the new currency takes root, we can be sure that the Venezuelan military will continue to conduct its operations in $100 bills.</p>

<p>In response to the domestic and regional crises generated by the Maduro regime, <strong>the US has put in place severe trade and financial sanctions, and Trump has reportedly <a href="">floated the idea</a> of invading Venezuela</strong>. American military intervention is of course a crazy idea, and even the many Latin American leaders who desperately want to see the regime go would never support it.</p>

<p>But <strong>the US can and should greatly step up financial and logistical aid to help neighboring states deal with the overwhelming refugee problem. </strong>And it is not too soon to start planning for reconstruction and repatriation of refugees after Venezuela’s brand of socialism – or, more accurately, oil and cocaine clientelism – finally comes to an end.</p><img src="" height="1" width="1" alt=""/>

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