As crisis worsens, Venezuela becoming more isolated

simon bolivar airport

Venezuela’s implosion continues.

Amid hyperinflation, massive unemployment, social unrest, political oppression and shortages of food and medicine, the South American nation is on the verge of general anarchy, a legacy of Hugo Chávez’s years of mismanagement, along with that of successor Nicolás Maduro.

So it’s hardly surprising that airlines such as Lufthansa and LATAM Airlines are crossing the country off their schedules.

The pair joins Air Canada, American Airlines and Alitalia which in recent years have scaled back or suspended Venezuelan operations, according to The Economist.

But it isn’t just unrest or political chaos that’s driving airlines to divert flights elsewhere.

Venezuela, seeking to avoid yet another devaluation of its currency or outright repudiation of debt, which would cut off credit to the ailing oil industry, has tightened currency controls introduced by Chávez in 2003.

The restrictions make it almost impossible for companies such as international airlines to convert the Venezuelan currency, bolívares, into dollars.

This has made it difficult for international airlines, who typically charge customers in local currencies, to repatriate their profits.

That isn’t surprising given that Chávez initially implemented currency controls after capital flight led to a devaluation of the currency.

“Lufthansa has written off the more than $100 million it says it is owed; LATAM says it is due $3 million,” according to The Economist. “The International Air Transport Association, the airlines’ trade body, estimates that Venezuela’s government is withholding $3.8 billion of airline revenues.”

A Lufthansa spokesman told Agence France-Presse that the country’s difficult economic situation and “the fact that is it is not possible to transfer foreign currency out of the country,” is behind the company’s decision.

Lufthansa is scheduled to quit service to the country this week; LATAM, Latin America’s largest airline group, has said it will stop flights to Venezuela by Aug. 1.

Contrast the current situation with that of 40 years ago, when Venezuela’s oil wealth attracted business travelers – and airlines – from all over the world.

At present, just a handful of foreign airlines continue to serve the troubled nation, including Air France and United Airlines.

But both are public companies and it seems unlikely either can or will stand for having their revenues tied up by a banana republic.

(Top: Air France plane show in foreground at Simon Bolivar Airport, near Caracas, Venezuela.)

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11 thoughts on “As crisis worsens, Venezuela becoming more isolated

    • Chavez’s popularity seemed like a cult of personality.

      I’m certainly no fan of socialism, but I think anyone who would have taken an unbiased view of his economic plans would have seen that they unsustainable.

      Had it not been for oil revenues, the country – or regime – would have collapsed long ago. It’s unfortunate that millions of average people in Venezuela have had to endure such misery for so long.

  1. I think of “Open Veins of Latin America: Five Centuries of the Pillage of a Continent,” by Eduardo Galeano, the book Hugo Chavez gave President Obama. It recounts the five centuries of invasion and plunder of natural resources–beginning with the gold and silver mines–by foreign interests, most recently by American corporations. To blame Chavez for his actions misses the point. He was a product of his times and the reaction to a long history of foreign, predatory, institutional investors. This continues in multiple “emerging economies.” Look at what’s happening in Brazil.

    I think it would be good for these “emerging economies” to renounce debt to foreign investors, but probably no one would agree with me.

    The oil in Venezuela is an “attractive nuisance,” from the natives’ viewpoint. While the governments have profited, the people have suffered the consequences of oil exploration, including the land’s devastation from oil drilling and export. This is the kind of activity that widens the gap between rich and poor.

    I am glad for Venezuela that foreign investors are leaving, and I hope the exit will allow the local economy to re-balance itself. If any group is to blame, blame the foreign investors who colluded with the Venezuelan bureaucracy to destroy the people’s economy.

    • No doubt that Venezuela, along with many other South and Central American nations were exploited. But I’m not sure that the country’s economy is going to succeed without foreign investment, or without some basic implementation of property rights within the country.

      Apparently, it’s very easy for the government to confiscate whatever it wants, no matter who it belongs to. That tends to breed a lack of confidence in the populace and dissuades it from putting whatever money it may have in business or development.

      Chavez may have been reacting to centuries of misrule by others, but his economics had no chance of succeeding unless Venezuela pumped so much petroleum that it could literally use the oil revenues to overcome economic shortcomings inherent in socialism. That didn’t and still hasn’t happened.

      There’s no reason that, with a competent government and adherence to basic property laws, foreign investment couldn’t return to Venezuela and benefit both those putting their money up and the country’s citizens at the same time. The two don’t have to be mutually exclusive.

      • Granted, Hugo Chavez’ action was reactionary and ultimately destructive. On the other hand, the US embargo against Cuba forced Castro to make do with what he had.

        While others see the current Cuba as backwards, the populace has pulled together to grow in self-sufficiency. Castro was not an empire builder. He put government resources into agriculture and education, especially medical education, and has exported doctors and health care workers to some of the world’s neediest countries, including Venezuela.

        The corporations are leaping at the chance to invade Cuba with their vampiristic practices, tap into the labor force, and export everything of value.

        People interested in assisting Venezuela’s starving people might consider following Castro’s example, not by sending money, but by sending food and doctors. Clean out their overstuffed closets and send the excess. That’s the kind of foreign investment that might do some lasting good.

  2. Oddly enough I was talking to a woman heading back to Venezuela while waiting for my flight at Madrid a couple of days ago.
    She was very worried about the insecurity in the country – the sense of doom and collapse.
    In her view Chavez always refused to accept the existence of the level of poverty in the country and instead used the oil wealth to build the Bolivarian movement in Central American Latin American and Caribbean countries – ALBA.
    Not one of the countries he aided is lifting a finger to help Venezuela…..

    • To be honest, I sometimes wonder how countries get in these kinds of messes. But it’s usually not all their own doing and often, when the bottom falls out, the rats who helped put them there tend to be the first to flee the sinking ship.

      It seems difficult to comprehend that other countries, in Central America specifically, wouldn’t see the downside to Venezuela’s collapse and the effect it could have on their own countries, particularly in terms of people crossing borders to escape a failing state and all that entails. It’s not as if Venezuela is the equivalent of Djibouti, with little to offer; once it’s able to stablize itself it should be a productive nation that can benefit other nations through trade and tourism.

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