Venezuela: Forty Years of Economic Decline

This is Part Two of a two-part series. Part One is here.

The brunt of the blame for Venezuela’s current economic catastrophe should fall on Hugo Chávez and his successor Nicolás Maduro. However, this does not mean that all was well in Venezuela before Chávez arrived on the scene. The ideological and institutional seeds of the current crises were sown decades earlier. A rising tide of government interventions in the marketplace during the 1960s and 1970s would soon lead to a host of new problems for Venezuela.

The Oil Boom Party Ends

The 1970s looked like a never-ending boom period for Venezuela thanks to high oil prices. The then-President Carlos Andrés Pérez took full advantage of this boom to implement his lavish social spending program. Eventually, the boom period came to a crashing halt by the early 80s, and Venezuela had to face a harsh economic downturn.

Luis Herrera Campins would succeed Carlos Andrés Pérez’s government. From the start, he came to the realization that Pérez’s spending bonanza was unsustainable. In fact, Herrera had choice words for Pérez’s policies, claiming that Pérez left him a “mortgaged” country.

Although Herrera was correct in his assessment of the Pérez administration’s fiscal irresponsibility, he would ironically continue more of the same cronyist policies as his predecessor. The chickens eventually came to roost as Venezuela experienced its very own “Black Friday.”

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