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Spare a Thought for Venezuela

Katim S. Touray

Please spare a thought for Venezuela. This, the 33rd largest country in the world and with about 34 million people, the largest proven reserves of oil, the cheapest price of gasoline in the world, and was in 1950 richer than Germany, has fallen on times so hard in this once Latin America's richest country that 75% of the population lost an average of 11 Kg (24 pounds) in weight in one year because of food scarcity. And you might ask: "Why should I care?"

Venezuela is located on the northern coast of South America and shares land borders with Brazil, Colombia, Guyana, as well as Trinidad and Tobago. Officially called the Bolivarian Republic of Venezuela, the country was colonized by Spain in 1522 but gained full independence about 300 years later and 188 years ago, in 1830. Venezuela is a charter member of many important international organizations, including the United Nations (UN), the Organization of American States (OAS), Mercosur (the South American trade bloc), and the Organization of Petroleum Exporting Countries (OPEC), to name a few.

Venezuela is the 10th largest exporter of oil in the world, and its economy is largely based on the petroleum sector, which accounted for over 50% of the gross domestic product (GDP) of the country in 2015. Thanks to a huge government subsidy program, Venezuela has the cheapest gasoline in the world, costing $0.11 per gallon ($0.03 per litre) in 2014, even after a 6,200% increase!

Give Me Two!

Venezuela's history, although rocky, has had its glorious moments, including periods of political plurality, as well as oil-fueled economic booms that attracted immigrants from near and far (including Europe) into the country. Venezuela has also had dark moments of political turmoil, dictatorships, and economic gloom, because of various domestic and external factors.

Venezuela enjoyed both a relatively stable democracy, and significant economic growth between 1958 and the early 1980s. During this period, politics was dominated by two parties, and government revenues more than doubled after the 1973 Arab-Israeli war resulted in a huge rise in oil prices. Although the boom would soon turn to burst, it lasted long enough for Venezuelans to become known for the phrase "Ta barato, dame dos” ("It's cheap, give me two") as they bought up relatively cheap goods in their travels abroad.

In the early 1980s, the global oil glut brought down crude oil prices, and along with it, the Venezuelan economy. As a result, the country's foreign exchange reserves ran desperately low, as government debt mounted, and in desperation government devalued the currency by 100% on "Black Friday” (February 18, 1983). In addition, government announced an IMF-backed economic reform program which increased fuel, transport, and utilities prices, and lifted the price cap on some basic goods.

As a result, the country was plunged into economic and political crises, with deadly a wave of protests called the Caracazo riots in which an estimated 300 to 3,000 people died. The prevailing conditions also resulted in two unsuccessful coup attempts (in February and November, 1992), by leftist military officers, led by Hugo Rafael Chávez Frías to overthrow the government. Although Chavéz was imprisoned after the first coup attempt, he was pardoned in March 1994, thus enabling him to contest, and win, the 1998 presidential elections.

The Road to Hell

The road to hell, they say, is paved with good intentions. And if anything, Venezuela's current tragic plight proves the adage, given the innocuous and well-intentioned start of the Chavéz-led Bolivarian Revolution.

Following his victory in the 1998 elections, Chavéz embarked on a reform campaign some have termed "institutional engineering” in a bid to consolidate his power and break the 40-year hold the two leading political parties had on Venezuelan politics. Chavéz also implemented "democratic socialist" economic policies, including the redistribution of wealth, land reform, the creating creation of worker-owned cooperatives, and the attainment of food security and food sovereignty. To implement these policies, Chavéz created social programs called Bolivarian Missions and Communes, and 100,000 state-owned cooperatives.

Venezuela suffered an economic downturn in early 2002, and this, coupled with anger about Chavéz's war on the elites, and his alignment with Fidel Castro's Cuba led to an abortive coup against his government in April 2002. That same month, managers at the state petroleum company, Petróleos de Venezuela (PDVSA), went on a two-month strike over Chavéz's nominations for new members of the company's board of directors. Chavéz had long denounced PDVSA (parent company of Citgo, a US energy company) for its association with the US and business elites. After the collapse of the strike, Chávez fired 18,000 PDVSA employees and replaced them with 100,000 of his supporters, aka Chavistas.

The failed PDVSA management strike enabled Chavéz to take control of the company's coffers to fund his social programs and support his political base. By 2011, some $500 million was siphoned from the PDVSA pension fund to finance government-backed financiers. Such lavish spending inflicted the Dutch Disease on the country, with its fiscal health wrecked, despite increasing exports of, and revenues from oil.

Chavéz's policies were initially helpful, but unsustainable because of the drain on the country's finances. While poverty rates decreased 48.6% in 1999 to 32.1% in 2013, Venezuela had the one of the highest literacy rates in the region, and malnutrition fell from 21% in 1998 to 6% in 2009, price controls led to shortages of goods. Similarly, currency controls, introduced to curb capital flight exacerbated matters by leading to a shortage of foreign exchange, a decline in the value of the Bolivar, and increasing inflation.

Although oil prices increased significantly later in 2002, bringing in huge revenues, Venezuela's economy began to collapse because of what someone called RIDDS: recession, inflation, declining foreign reserves, debt, and shortages. Thus, the huge increase in government spending during the 2012 campaign to re-elect Chavéz ballooned public debt and fiscal deficit. Similarly, the decision to replace trained PDVSA personnel with revolutionaries, and deprive the company of capital decreased oil production, despite increasing levels of proven reserves of oil.

Between 2007 and 2013, inflation grew an annual rate of 27.4% (at least five times the rate for Latin America), scarcity, (especially of food, medicines and essential goods) set in, and foreign reserves fell at an alarming rate of $38 million per day. In short, all indicators pointed to trouble ahead for Venezuela when Chavéz died in March 2013.

Enter Maduro

Following the death of Chavéz, his Vice President and former Minister of Foreign Affairs, Nicolás Maduro Moros, became Interim President. Maduro went on to win the constitutionally-mandated presidential elections in April 2013, and was inaugurated as President on April 19, 2013. A former bus driver who did not complete his high school education, Maduro made up for his lack of the charisma that Chávez, his predecessor and mentor, had by being autocratic and continuing Chávez's populist programs.

Things got worse in a hurry. Annual inflation increased from 29.4% in April 2013 to 61.5% a year later. Hyperinflation (i.e. monthly inflation rate exceeds 50%) set in in 2016 when inflation reached an annual rate of 800%, and the economy contracted almost 19%. By September 2016, 15% of Venezuelans were eating discarded food they picked from dumpsites.

In 2017, inflation reached 4,000%, as Venezuelans lost average of 11 Kg (24 pounds) because of food shortages, and 90% of them lived in poverty. To make matters worse, the US government slapped sanctions on Maduro in a bid to prevent him from raising additional funds. Last month, Venezuela's annual inflation rate reached a staggering 200,000%, meaning that prices increase by that much since August 2017. In addition, corruption and crime increased, and people took to the streets to protest against the difficult conditions they were enduring.

President Maduro tried every trick in the book to arrest the country's slide into chaos by increasing the minimum wage four times between April 2014 and July 2015, changing the method of calculation of inflation, introducing a crypto currency, the Petro, as well as devaluing and re-denominating the currency by cutting five zeros from it. Nothing worked.

In exasperation, Venezuelans have been voting with their feet, with an estimated 1.6 million of them having fled their country since 2015, according to the UN agency for migration. The majority of these migrants are professionals and the middle class, thereby depriving the country of much-needed human capital. The mass emigration of Venezuelans has also strained neighboring countries (especially Colombia and Peru, which have taken in almost 1 million, and over 400,000 Venezuelans, respectively), and provided graphic images to a global audience. About two weeks ago, a Summit of 13 Latin American countries agreed to reduce restrictions on Venezuelan migrants, and appealed for more international aid to enable them deal with the inflow of Venezuelans, which Venezuela's president Maduro said was "normal."

Who Cares?

Venezuela's economic meltdown should be of concern to many, including those in the Internet infrastructure industry. With one chicken costing 14 million Bolivars (about $2.2), and banks out of cash, it is easy to imagine how difficult it would be to register or renew the registration of a domain name, or purchase a certificate of authority, not to mention buy hardware such as servers. Such challenges impact many people and issues such as online privacy and safety, as well as security, both within and outside Venezuela.

Venezuela should also be a cause for concern because it has been a major source of funding for developing countries, especially in development cooperation among developing countries in the global South (the so-called South-South cooperation). Between 2000 and 2011, Venezuela spent $7.6 billion (in 2009 USD) on development finance in other countries. In addition, Venezuela initiated the Petrocaribe alliance which provides oil at concessionary terms to its 17 member countries, many of them from CARICOM, the 15-member Caribbean economic community.

Despite the unimaginable difficulties faced by Venezuelans, they continue to make significant contributions to the maintenance of the global Internet infrastructure as well as the policy development processes that underpin it. The Venezuelan ccTLD, .VE is an important part of the Internet infrastructure, along with copies of the F and L root servers. Earlier this year, the .VE ccTLD was reported to have had an additional 48,000 domain names registered compared to a year earlier. This increase, however, is probably due to the high-handed methods of the Venezuelan government which banned the use of all non-.VE domains in the country.

In partnership with the Latin America and Caribbean Network Information Centre (LACNIC), Internet Systems Consortium (ISC), and ICANN, Venezuela installed copies of the F- and L-root servers in 2006, and 2015, respectively, thereby helping increasing the resilience of the Internet infrastructure in the region. Venezuela's contribution to the global Internet infrastructure includes the ALBA-1 fiber cable which connects Venezuela, Cuba and Jamaica to the Internet. Other international sub-marine cable projects Venezuela is connected to include the Americas-1 South, the Americas-II, Arcos-1, the Atlantica-1/GlobeNet, and the PAC.

Besides hardware and hard cash, Venezuela also contributes to the global Internet by participating in ICANN, and other similar regional and international organizations. Venezuela has been a member of ICANN's Government Advisory Committee (GAC) since 2014, is a member of the CCNSO as well as ALAC, and its regional structure in Latin America and the Caribbean, LACRALO. Venezuelans also contribute to the work of Internet-related regional organizations such as LACNOG and LACNIC, work in the DNS industry, and have an Internet Society (ISOC) Chapter.

What Now?

In view of the difficult economic situation in Venezuela and the contribution of the country and its people to the global Internet, it is fair to contemplate what can and should be done to support them. Clearly, support from the international community should be coordinated, and tailored to the missions of various organizations or partner providing such support.

Venezuelans themselves should take the lead in the developing a support program or programs. In this regard, organizations such as ICANN and ISOC, along with international development partners (e.g. World Bank, and the ITU), should work with Venezuelans, as well as regional partners (e.g. LACNIC) to develop a support program to address current needs and plan for the recovery of the Venezuelan economy.

Although this might be easier said than done given that the US is hell-bent on regime change in Venezuela, the old adage that there's a way where there's a will applies. ICANN, for example, can help in a number of ways including travel support to enable Venezuelans attend the organization's meetings and providing them additional slots in ICANN'S Fellowship and Future Leaders programs.

ICANN can also support the Venezuelan Internet infrastructure and DNS industry players, including ISPs, registrars, the .VE ccTLD registry, and operators of root server copies. ICANN, ISOC, and the DNS industry outside Venezuela can hire Venezuelans who are or have been active in these communities but were forced to leave their country because of the difficult circumstances prevailing there.

No Condition is Permanent

Venezuela's present predicament is a good reason to recall the Nigerian proverb: No condition is permanent! As tough as things are, they will get better. Just as the United States, which once paid tributes to Barbary (aka Ottoman) corsairs based in Tripoli, Libya, can now choose when and how to lord over that country, Venezuela will one day rise from these ashes. This is a great time to leave a lasting legacy on the minds of Venezuelans, especially the younger generation, and all hands should be on deck to help them wade through their present difficulties. So, when next you get in the mood to sing What a Wonderful World, please spare a thought for Venezuela.

By Katim S. Touray, International Development Consultant, and ICT for development advocate
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Share your comments

Spare a thought for Venezuela Ousman Njie  –  Sep 18, 2018 10:26 AM PST

Interesting article! A good synopsis of the Venezuela tragedy
I hope iCANN and similar organizations assist the internet industry in Venezuela during this difficult period.

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