Venezuela: A Diet Read on Money Laundering and Socialism

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A quick think piece, easy to read and understand. All as a look back into my country's last two decades, from a perspective focused on the economical reason and the natural development behind its
current state.

Submitted: February 26, 2018

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Submitted: February 26, 2018

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Socialism is not a good system by any means, but the reasons behind its failure are more the underlying flaws that when applied in a practical level, where parallel systems necessary to hold society together collide with its foolish idealism, cracks it open. 

Venezuela. Venezuela is a small country on top of south america, its history is not the more stellar while its location and resources are all that and more. The current government in Venezuela belongs to a self-proclaimed, and in many ways truly, socialist party. Formerly a movement of several political groups with similar ideals now goes by the name "Venezuelan's United Socialist Party" or PSUV for its initials in Spanish, and carries the banner of its original frontman, the now defunct president Hugo Rafael Chavez Frias (1954-2013). He was so influential that this so-called revolution of his bears his name, "Chavizmo" or Chavism, and ruled as president and supreme commander from 1999 to his demise in 2013.

The Chavist government. A socialist retort to the decrepit in many ways "capitalists" of yore, was never an uneventful government. It saw its rooting in several attempts at a coup from branches of the military, partially lead by the aforementioned Chavez Frias. It promised a better country for its poor while still retaining the opportunities for progress of the capitalist market, this of course, was a lie. Oil was at 100$ a barrel and we had, and have, a lot of it. The money was used to finance projects to deliver food, money and more power to the lower class, we also saw renovations and an influx of relative wealth, the rich travelled foreign often and the poor had access to things they never even dreamed of like houses and even cars.

But where the frankly under-educated, and this coming from a country where education (from basic to major) is fully free, poor saw the socialist utopia they were promised, the government saw a capitalist's wet dream. In their hands they had a constant influx of money (Oil) and the socialist structure they ran gave them full control over it, even the currency exchange and several banks were, and are, under their control. Most important of all they had what any money laundering scheme needs, accomplices, lots and lots of accomplices, approximately 30m. The entire Venezuelan's populace, which depended on the regulated dollars the government held for foreign trade to maintain their enterprises, became part of this practical mafia, with many citizens walking onto the political stage to have a good bite and even private citizens joining up on ventures, both immoral and illegal, to take advantage of the parallel markets this regulation created.

You see. The laughable "official" exchange rate was a determined sum, a ceiling placed on the worth of foreign currency by a former government (not the Chavist) which made our money unable to fluctuate, whether up or down. A move made on the basis that the nationalised, and government run, oil companies represented the majority of the country's income. This, if you have ever picked up an economics book, is of course and idiotic system, because it doesn't matter what the guys printing the money say it's worth, it's what the guy giving you an actual product, with an actual practical value, says it's worth what matters. 

With the only thing you could buy with the Bolivar (official Venezuelan currency, shortened as Bs. what a coincidence) being Venezuelan's products, of which there's almost none worth your time except for oil which is bought in dollars, or a very much limited amount of foreign currency the market value for foreign entities of the bolivar was clearly lower than its "official" counterpart. 

So, if you wanted more bang for your buck, what did you do? Since you couldn't buy all the dollars you might want, what was there to make money? Simple, buy dollars at an official rate, if those weren't enough, and since those are national ID based, you took some out in the name of your friends too poor to buy them, were you the owner of an enterprise? You took out your employee's as well and then make a really good looking deal with a ghost enterprise and ask for the dollars to finance it. Then you put them in a foreign bank account and leave just enough to buy the same amount of bolivars you used to buy the dollars, at a foreign exchange, who's ought to have a lower price and repeat the process. Are you thinking what if they got caught? Don't worry. Because everyone was doing it, the people who were meant to stop you were the ones doing it the most even, you just didn't step on their toes and you were safe. Even today, with the current crisis the same phenomena keeps happening.

There it was, your social utopia, where everyone was the same because everyone was knee deep in shit. People never believed themselves so smart while they were all actually playing on this government-mafia's game. The government of course had to take it even further, it was so lucrative they couldn't just stop. The actual money ($) had to be taken out of the country as fast as humanly possible and the financing of this socialist programs made it a bit harder, they also had to keep giving money to the actual businesses which produced and mostly imported the things the populace needed. And so the slippery slope our economy was, was greased up.

The next stage is what I call the "For the people?" stage, a series of questionable movements in the name of socialism made to sustain and cover up the money laundering enterprise which was and is the Chavist government, which to be as lucrative as inhumanly possible faced 3 big problems: 

-Problem #1. The lower class, which are the origin of your public popularity, are by design needy and entitled, and the programs you use to rail them up do cost.

-Problem #2. The businesses which maintain relative order and comfort on the country, while also being a capitalist stain, have need of the regulated dollars to operate.

-Problem #3. If everything fails and the people revolt, the only lifeline the government will have is the submission of the people through force.

The Solution: First you have to give them money to keep their sense of entitlement. This is not much trouble since you technically have control of how much money there is and you know it isn't really worth anything. So you print a lot of it and hand it over any excuse, whether they're young or old, stay at home women or working man they all should feel like they DESERVE that money.

Next you have to please 2 main necessities, housing and food, education is not required since it will actually deter you. For housing you make good use of political allies, ghost enterprises and unscrupulous contractors. From Turkey to China, from Belarus to Russia you "hire" companies to build cheap facades of what you will call "houses" and "apartment complexes", on cheap land that you know might, and will, crumble under the weight. Rather than hire national you go for foreign because it plays out on your laundering scheme since it lets you get more actual money out.

When it comes to food it's a bit tricky, to train a child to eat something unusual is quite the task, and the same goes for adults. The solution the government found was a classic move, the move that started it all, regulate the price as they did with foreign exchange. Several of the most commonly bought products were put under a heavy regulation, only this time they were in no possession of the object under this ceiling, this were products imported by private companies, they did so all the same because business closing or rioting due to this new prices being unsustainable were actually a good thing. This sole move did not only put a limit on how much they could ask for a product (since the cost in dollars had to be directly related to its now regulated cost in Bolivars) but also if they decided to close up or go somewhere else it was one less big expense for them and more actual money to get out. Still, people need to eat, and while regulation made food more accessible to people without any actual investment on your side, it also lead to scarcity, time for another classic move, and the missing puzzle piece to this problem shooting conundrum falls into place.

Up until now we have seen the solutions to problems #1 and #2 to have a major breaking point. You can't feed the populace if food is scarce and you can't promote healthy market systems because it empowers them, and it will cost you. Time to solve it all with the solution to problem #3, nationalisation and demonization. Through the expropriation of several companies over the lesser of "offences", the government saw the opportunity to get rid of an economical and political enemy while at the same time making a great ally. It wasn't uncommon for the military to be favoured by the former democracy, Hugo Chavez was himself a military man and so were his vice-president and several other high rank functionaries, but you couldn't just cram every general into a "public servant's" role as to keep them loyal, but to them there was something, something everyone needed and where people had already made good money on, enterprises.

The void left by the fleeing investors was not without notice, food was almost never found and when it was it lead to long lines for just one or two products. People felt uneasy and angry and the government had the right place where to place that anger, the private business owners. Campaigns blaming society's problems onto the greedy capitalists became the common sight on public television, radio and most forms of the, for quite a while now, controlled media. A campaign to nationalise practically everything, from giant processing plants, to distributors, to farms and even simple stores was in full force, with considerable popularity due to the misplaced anger of this entitled citizens. Everything's good, but one thing is getting the "imperialists" out, the other problem is who to put in charge of the newly, all national, all organic, non GMO, productive engine made entirely of what could be called by some, stolen properties. The answer was clearly not farmers or businessmen, but the military. 

If you held a position in the army's command ladder you were eligible to enter the lucrative business of money laundering under the governments banner, and do some slightly less interesting business on the side, like bringing food to people or maintaining infrastructure, you didn't have to pay much mind to it. This was not only a fine way to get the army on your side, with generals and lieutenants holding managing charges and the common soldier receiving priority to the products brought, over any other civilian. It also meant full control over the foreign trade, and by extension, full control over the movement of actual money. Now they could force this army based business to enter highly unsustainable debt, on the name of the government, to keep the people happy while expending absolutely nothing except for the "pay" to their new old allies. Lets add another pseudo-militia in the lower class people who turned to criminality, aid them financially with money not worth a dime, guns and protection and Problems 1 through 3 all patched up.

The term "patched up" is without irony, this system is clearly unsustainable, and lasted them as much as it could while they were still on top. The oil barrel dropped to all times low of 40$ and only recovered to about 60$. This robber's economy where everyone is a member of the mafia and no one's a worker led to even the oil industry to collapse, with all time low production, and was even harsher in about any other front, from services to goods nothing really works anymore. The foreign relations were more than pleased to have an ally willing to launder a couple trillion dollars but are clearly and reasonably disgusted at the idea of spending in such a mess, like everybody else. The last stand is due right now, people die of hunger or sickness, last one because planning for happy times made through lies, inherently sad times like health issues were always a bad investment even in a country with free universal health. When they aren't dead the Venezuelan is no longer here, with an exodus of people estimated at percentages as high as 20% in the search for a better life a professional can abandon the country, and with a title it took them years to obtain dedicate their life to the service industry. Criminality is so rampant the issue is not criminals wondering what to do without getting caught, but rather what to do that would give them any money at all. The military is a lost cause, another gang, this one with thousands of people with weapons of war, extorting, robbing and raping all the same like common criminals. Incarceration and torture of people against the now regime under the foolish current "president" who took the dictator role, Nicolas Maduro Moros (1962-20??), are so common I fear for my life while writing this. But anyway, current Venezuela is not so much life, as it's limbo.

The regime will probably last, and most of the people involved will go out without punishment, that's how it happens, the important thing is to learn from it, to not let this happen one educated opinion at a time. I don't know everything and I barely know anything, but even a little piece of information could avoid for people to fall for the deception and the propaganda, whether it's to implant something similar, or to dissuade people by calling things "Socialism, the devils system" and dismiss actual concerns that could be addressed with what they categorise as "socialist" ideas. Don't let people move you by shouting names, and when they try to do so, remember the names of the millions who died to deliver this lesson to you, to me and to everyone.


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