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.
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