Why are so many fleeing Venezuela? Famine

The Venezuelan crisis is massive. Millions of people are fleeing the country. Brookings scholars project that a third of the population may leave before the end of next year. The outflow could surpass Syria’s.

But why? Yes, there is a hyperinflation. But the world has had a lot of hyperinflations without mass refugee flows. Yes, there is a huge fall in GDP. But the world has seen similar falls in GDP without generating mass refugee flows. Yes, there is political tyranny, but the world has seen lots of terrible tyrannies, and there isn’t a civil war.

Well, the root cause is simple. Famine. An accelerating famine. An honest-to-God 21st-century famine.

Venezuela doesn’t produce enough food to sustain its population. That means that it needs to import food. But with oil production in free-fall and foreign borrowing cut off, the country has no way to buy the food that it needs. The Confederation of Associations of Agricultural Producers of Venezuela (Fedeagro) estimates that the country produces less than a third of what it needs. The USDA reports on grain production make for thoroughly depressing reading. In short, the country cannot buy the amount of food it needs from abroad and does not grow enough at home to fill the gap. 

I am not sure if Venezuela could be self-sufficient in food. I suspect that it could, were oil not allowed to systematically distort the economy. 

But the problem is not that Venezuela is not self-sufficient in food.

The problem is that the Bolivarian Republic has systematically attacked its own farm sector, destroying its ability to buy inputs or operate without losses. For all the decline in food imports, they are still above the levels of the mid-1990s ... but the domestic production is  no longer there.

The below chart tracks food imports per capita (nominal data from here). In 2016, Venezuela imported about one billion dollars of food products. The IMF tracks the international price of food, so we can convert that to real imports per capita. In real terms, Venezuela in 2016 imported about as much food per capita as it did in 1997. Venezuela was not short of food in 1997. But in 2016 that same level of imports was not enough to prevent famine. 

What political advantage accrued from destroying domestic agriculture, even during the good years, is utterly beyond me. And that, yet again, is the tragedy of Venezuela. It isn’t the evil, it’s the incompetence. Raving, insane, pointless incompetence.

In order to understand the current Venezuelan crisis, we need to turn to the economic and political science literature on famine ... which is not something I ever expected to say about an American country in the early 21st century. 

Comments

[shah8]

I have read some material on the cooperation between Bolivarians and Polar corp, so now I'm wondering where I can read about a "systemic" attack. I know of conflicts in terms of land redistribution--but that generally has affected production for export, and I also tend to discount because of the racism underlying practically every land redistribution fight in the world.

I can imagine the behavior with the currency gaming doing lots of harm in getting equipment in, but I'd like to know more.

[Noel Maurer]

The government deliberately cut private farms off from the foreign exchange they needed to by imports.

Land expropriations hit all farms, not just export crops. That's mostly because Venezuela's export agriculture had been wiped out by Dutch disease decades earlier. It will be a while before we have the data we need to know how badly.

But the big blow landed from the Fair Price Act.

[shah8]

Thank, will look that up. I thought it was something like that or forcible sale of product below cost.

[Luciano]

Creating famine is a feature of Communism and Tyrannical Socialism, not a bug (see Ukraine famine in the 1930s). The very simplified idea is as follows: the Government pursues equality of outcome and demonizes any competence as oppression. Farmers who were best at producing food manage to do better than the others and were then considered a problem and are either killed (Soviet Union, Mao), expropriated (many examples) or disabled (Venezuela). Under redistribution, the land is redistributed randomly or corruptly and production drops.

Reducing the argument to "only export crops are affected" is a double fallacy. Firstly, a significant portion of production (such as dairy farming) was focused on local markets, while being highly productive enterprises. Secondly, even export cash crops can contribute to food supply indirectly by providing FX to import food.

Furthermore, farmers were not just disabled by lack of FX (a relatively recent issue) but previously by runaway labor rules. Many farms had to mechanize in a country with high unemployment and availability of low skilled workers due to the risks aasociated with having employees. Later, the mechanisation tools and inputs were made unavailable due to lack of FX for the few producers who had not yet been prosecuted in some other way.

[Andrei Gomberg]

Actually, there is a big difference between Ukraine in 1930 and Venezuela in 2019. Stalin was, of course, evil, but he had an objective in mind, and he got it. He did not organize famine to achieve any sort of nebulous "equality" - he couldn´t care less about that. He wanted industrialization. The countriside was robbed in order to get resources to import machinery and to feed urban workers. That many of the farmers died off in the process was, indeed, a feature, not a bug - Stalin disliked the rural independence. It is true, the wealthier farmers were explicitly targeted - but in the end all of them were pretty much expropriated and, especially in Ukraine, being poor was no defense against the famine, which took everyone.

Now, in Venezuela the current disaster happens alongside the general deindustrialization. The government has not robbed the farm to feed the cities either. If anything, getting food is harder if you are not growing it yourself. There is no well-defined objective, however cruel or immoral, in any of it. Just staggering incompetense.