How Bad Off Is Oil-Rich Venezuela? It’s Buying U.S. Oil
Currency controls and price controls and government nationalization have destroyed Venezuela.<p>Currency controls: there&#x27;s a 1:10 exchange rate, dollars to bolivars, for essential imports, like food, medicine, etc. The black market exchange rate is about 1:1010.<p>To get the good rate, you need connections. But hey, it&#x27;s a pain in the ass to actually contact suppliers and get goods through customs, and you&#x27;re capped at what price you can sell goods at, so what you do is actually exchange 10 bolivars for a dollar, and turn around and exchange that dollar for 1000 bolivars on the black market. You keep doing that until either you have way too much money or you lose the preferred exchange rate.<p>Price controls: No country is an island these days. No matter what good it is, you need external imports. For instance, if you&#x27;re making beer, you might need to import hops or barley (true story, look up Polar in Venezuela).<p>With the currency controls, you can&#x27;t get hard foreign currency to pay your suppliers. And they sure as heck aren&#x27;t going to accept your debased currency as payment. So your factories sit idle, because you just can&#x27;t get supplies for production, and then the government nationalizes your factory because you&#x27;re &quot;sabotaging production&quot;.<p>Government nationalization: The goal of the government is ideological purity. If you&#x27;re not producing goods for sale at artifically low prices (sometimes the sale price is below the cost of production), the government swoops in, calls you an enemy of the revolution, and replaces all the skilled people who are ideologically impure, such as managers, with party hacks who have no idea what they&#x27;re doing. That&#x27;s why Venezuela oil production is in the toilet.<p>The Nordic version of &quot;socialism&quot; simply involves taxing the rich and giving subsidies to the poor. They don&#x27;t try to dictate prices or control means of production or fiddle with the exchange rate. The authoritarian socialism Venezuela is using right now has failed in every instance it has been tried.