My Country, Ladies and Gentleman

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Venezuela is now the most expensive country in the world

October 7, 2015
Caracas, Venezuela

Forget Norway. Japan. Iceland. Switzerland. Or any of the other places around the world that are notorious for being painful on the wallet.

Venezuela is now the most expensive country in the world, hands down.

To give you an idea, the cost of a 15-minute taxi ride to the beach yesterday afternoon totaled an eye-popping $158.

(I paid less than that to rent a helicopter in Colombia last week.)

With all of its vast mineral resources, Venezuela should be the most prosperous country in Latin America by far. And it once was.

But years of corruption, incompetence, and central planning have taken their toll.

Normally, when huge companies like Exxon Mobil Corporation (NYSE:XOM) extract oil out of the ground, they reinvest a portion of their profits back into improving their operations for the future.

They spend money on more infrastructure, technology, and exploration. In short, they invest in the future.

But in Venezuela, guys like Hugo Chavez and his successor Nicolas Maduro spent years funneling oil revenues into idiotic social programs designed to keep themselves in power.

Venezuela did not invest in the future. Now its oil infrastructure is rotting. Production is in serial decline. And the oil price has collapsed to boot.

This is bad news for a government that generates a huge proportion of its revenue from oil exports.

And just like how the United States and most of the West find it nearly impossible to balance their budgets even if they wanted to, Venezuela is in the same spot.

Especially now. With the government's budget deficit at 14% of GDP, they're barely able to make their debt payments this month without defaulting.

In fact, Venezuela is so screwed up that the government doesn't have a hope of balancing its budget unless the oil price is between $100 and $120 per barrel.

Thus, they've had to resort to even more destructive ways of making ends meet.

Like most governments, that means printing money.

The problem is: the Venezuelan bolivar isn't used as a reserve currency around the world like the US dollar or euro.

That is what has enabled the US to get away with printing relentlessly so far, as much of the resulting inflation is simply exported abroad.

But here, when they print bolivars Venezuelans are stuck with all of it. Zimbabwe style.

Inflation in Venezuela has been among the highest in the world, with some private estimates as high as 800%.

Once that became a problem, their solution was to introduce price controls, which failed miserably. Venezuela infamously tried fixing prices in the grocery stores and ended up with crippling shortages of everything from beef to toilet paper.

Then they decided to try capital controls by forcing a completely absurd ‘official' exchange rate to the local currency.

And that's what makes this country so expensive.

The official rate of the bolivar is 6.3 per US dollar. But the black market rate is over 60x higher.



Last night I met up with a local guy who had sacks of cash hidden all around his house, and I changed $50 for 20,000 bolivares. That's a rate of 400 per US dollar.

It's an unbelievable difference. 6.3 under the official rate. 400 in the black market.

My taxi ride yesterday really cost me 1,000 bolivares. Using the black market rate, that's a pittance at just $2.50. But using the official rate, it's $158.

So depending on which exchange rate you use, Venezuela can either be one of the cheapest countries in the world, or the most expensive.

But as you can imagine, exchanging currency in the black market carries SEVERE penalties.

And that's not all they're doing to prevent people from protecting themselves against a rapidly depreciating bolivar.

They've even tried blocking access to Bitcoin-exchange websites to prevent people from purchasing crypto-currency.

(Though these efforts are easily defeated by using a VPN.)

Desperate to make ends meet in an environment where they see their savings and standards of living deteriorate by the day, many people have been driven to crime.

Caracas used to be a paradise; now it's one of the most dangerous cities in the world.

It's a damn shame too, because this is a really wonderful country. And were it not for the crime, Venezuela would be a top retirement destination, attracting many an expat looking to live like royalty on $1,000 per month.

But that's not the case. Instead, Venezuela is sinking to rock bottom, and people here are suffering immeasurably.

All of this was brought on by yet another experiment in ‘central planning for the greater good' gone dreadfully wrong.

Too much spending created too much debt and too much money printing, which created too much inflation.

And inflation led to price controls. Capital controls. Media controls. Destroying people's standards of living. Appalling levels of violent crime.

They say the road to hell is paved with good intentions. Venezuela is a case in point, and shows just how short that road can actually be.

Westerners always think that these sorts of consequences can't happen where they live, as if the laws of the financial universe only apply south of the border.

It's not to say that the West will become Venezuela.

But if your government is already making its way down this path, taking on $60+ trillion in debt and printing limitless quantities of money, it's seriously foolish to assume that that it will not end up somewhere similar.

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Poutsos wrote:

Continuing ..."That is what has enabled the US to get away with printing relentlessly so far, as much of the resulting inflation is simply exported abroad." I mean REALLY? It says that as a POSSITIVE thing? Being in position to fuck other countries with your inflation?

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Poutsos wrote:

The article is rediculous. You live there. Tell me truthfully that you pay 160 dollars for a cab, because i flat out do not beleive it.

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Poutsos wrote:

Chavez was extremely good at reducing poverty and malnutricion levels within a few years to the point that no country has ever achieved. I am not in favour of Maduro from what i 've read, but the biggest pie of the blame still goes to US and it's imperialistic policies. I remember back in 2004 or so, when oil prices had gone through the roof here in Europe, Chavez was willing to sell us oil at half price, and noone dared to take it due to NATO.

Then the article goes on to say that "Venezuela should be the most prosperous country in Latin America by far. And it once was." Yeah it was, with 21% malnutrition(which Chavez' policies dropped to 6%). It was the most prosperous country with over 1/5 of the population not having to eat. Also Venezuela under Chavez became the most literate country in the region, and the second just behind canada in western hemishpere in income inequiality.

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Poutsos wrote:

Continuing ..."That is what has enabled the US to get away with printing relentlessly so far, as much of the resulting inflation is simply exported abroad." I mean REALLY? It says that as a POSSITIVE thing? Being in position to fuck other countries with your inflation?
I guess you like free markets? The country that were applied more than anywhere else in the world(under US backing of course), was just abit in the south, on Pinochet's Chile. If you prefer that be my guest.

The fact that Venezuela has oil does not mean much in US lead world. Middle East countries with that mind frame should have been the richest, most prosperous countries in the world, but the situation there is way worse than your country.

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C1111 wrote:

ppl pay over u$s60 for 2gb ram ddr 2 here :/

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Samkiud wrote:

Government management is all a country need to be prosperous, regardless of the oil resources or not, but you can't say that oil is not an influential fact that will help a country be potentially rich if well managed. Look at Dubai city, for example, and United Arab Emirates is below Venezuela when it comes to oil reserves. Yes, talk about their social issues and whatever, but are they as poor as hell as we are?

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Poutsos wrote:

I told you, from what i have read i am not a fan of Maduro, but i was critising a biased right wing propaganda article. For me nationalisation of, if done right is a good thing. Even in developed countries, like Germany, i was reading that when several key industries were privatised things went to shit, and they had to nationalise them back(Can a German from here please confirm this?).

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Poutsos wrote:

Oil in theory makes a country rich. It is not the goverment management that was in fault this time around. I told you. Chavez wanted to export your oil here in Europe, which would be very profitable for your country, but NATO did not allow it. For sure the goverment was not perfect in any way, but i insist that the biggest reaon you are facing these problems is due to the "economic warfare" that western countries have carried out against Chavez. USA always wants to have complete control of resourcefull countries, and when somebody objects to that, is going to fight you everyway it can. That was always the case with Castro as well. Authoritarian regime my ass. Batista that was in charge before Castro was far more authoritarian, and the living standards of the Cuban people were rock bottom, but he was serving US interests, so he was the "good guy".