21st Century Socialism Brings No Toilet Paper, TV, Or Long Distance Phone Service To Venezuela

Matt Vespa
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Posted: Apr 20, 2016 12:09 PM
21st Century Socialism Brings No Toilet Paper, TV, Or Long Distance Phone Service To Venezuela

In 2005, the late Venezuelan President Hugo Chavez moved quickly to remodel his nation by weaving “21st Century Socialism” into its socioeconomic fabric. Chavez was known for being an unabashed leftist, who chided the Bush administration pervasively–remember when he said the podium at the United Nations smelled of sulfur? Then-President George W. Bush addressed the assembly a day prior to Chavez. Well, Chavez is now gone, succumbing to a heart attack while fighting cancer in 2013. So, how has 21st century socialism treated Venezuela? It’s a total disaster. In January, The Washington Post reported that the country is on the verge of economic collapse. For starters, Chavez’s anti-poverty programs have sucked the nation dry, which is completely dependent on petro dollars to stay afloat:

The only question now is whether Venezuela's government or economy will completely collapse first.

The key word there is "completely." Both are well into their death throes. Indeed, Venezuela's ruling party just lost congressional elections that gave the opposition a veto-proof majority, and it's hard to see that getting any better for them any time soon — or ever. Incumbents, after all, don't tend to do too well when, according to the International Monetary Fund, their economy shrinks 10 percent one year, an additional 6 percent the next, and inflation explodes to 720 percent. It's no wonder, then, that markets expect Venezuela to default on its debt in the very near future. The country is basically bankrupt.

That's not an easy thing to do when you have the largest oil reserves in the world, but Venezuela has managed it. How? Well, a combination of bad luck and worse policies. The first step was when Hugo Chávez's socialist government started spending more money on the poor, with everything from two-cent gasoline to free housing. Now, there's nothing wrong with that — in fact, it's a good idea in general — but only as long as you actually, well, have the money to spend. And by 2005 or so, Venezuela didn't.

Why not? The answer is that Chávez turned the state-owned oil company from being professionally run to being barely run. People who knew what they were doing were replaced with people who were loyal to the regime, and profits came out but new investment didn't go in. That last part was particularly bad, because Venezuela's extra-heavy crude needs to be blended or refined — neither of which is cheap — before it can be sold. So Venezuela just hasn't been able to churn out as much oil as it used to without upgraded or even maintained infrastructure. Specifically, oil production fell 25 percent between 1999 and 2013.

The rest is a familiar tale of fiscal woe. Even triple-digit oil prices, as Justin Fox points out, weren't enough to keep Venezuela out of the red when it was spending more on its people but producing less crude.

As of now, the country has limited long distance call service, television access, and other telecommunications. Even toilet paper is becoming a luxury item:

Things in Venezuela keep finding ways to get worse. Because of acute shortages, people can't find basics like toilet paper. Now, it will be harder to make overseas calls or watch pay TV.

The problem is this: the global drop in oil prices has made dollars much more scarce in Venezuela -- which is dependent almost totally on petroleum for hard currency. So local telecoms companies don't have greenbacks to pay international suppliers.

President Nicolas Maduro's leftist government controls the currency market, and distributes dollars to private companies as it sees fit.

The government owes local companies around 700 million dollars, which these firms need to honor obligations with foreign providers, according to the Chamber of Telecommunications Services Companies.

So as a result, for instance, the Spanish telecoms giant Telefonica will temporarily suspend this week long distance phone service for calls to countries such as the United States, Spain, Mexico, Italy, Brazil, Colombia and Panama.

Mobile phone company Digitel, which is privately owned, has halted long distance calling services and international roaming since April 9 because it cannot reach agreement with providers on new payment timetables.

But it is not just telephone service that is affected. State-run television company Cantv, which provides cable service says it is reviewing contracts with providers of local and international content. That means there is less to watch on TV in Venezuelan living rooms.

So, here’s socialism for you–still making people’s lives miserable.