Venezuela 1999–2014: Macro-Policy, Oil Governance and Economic Performance

Does political risk matter for economic and financial risks in Venezuela?

“…Although a large body of literature has associated the decline of the Venezuelan economy and financial system with political factors (see Vera 2015;Bolton 2016;Littman 2016;Merke and Feldmann 2016;Cannon and Brown 2017;Dachevsky and Kornblihtt 2017;Buxton 2018), the authors are not aware of any studies that have attempted to evaluate this association quantitatively using modern econometric techniques. In other words, it remains unclear in empirical terms whether and to what extent political risk has affected the financial risk in Venezuela.…”

How resource nationalism hinders development: the institutional roots of the economic recession in Venezuela

“…Currently, domestic production is virtually paralyzed which turns the country more and more dependent on imports to meet basic needs (Vera, 2015). Yet cash limitations due to declining income flows, soaring deficits and very rigid public spending levels (Oecd, 2014) have seriously restricted fiscal leeway and the possibilities to increase or even meet pre-crisis import levels.…”

“…Total production has consequently diminished, and maintenance efforts have been minimal (Espinasa, 2012;Balza;. Debt levels have also been increased to cover massive social projects and governmental expenditures in various areas, unrelated to the oil sector (Monaldi, 2010;Monaldi, 2015;Balza;Vera, 2015). Moreover, despite little official disclosure on public finances performance, dispersed official publications, leaks or calculations on the overall financial situation have unveiled the increasing trend of public debt both by the central government and PDVSA at more expensive levels.…”

“…Such a wrecking of the institutional settings progressively set in motion the collapse of the existing Public Finance Management (PFM) system. The lack of political accountability caused by this strategy prevented any corrective measure, even before oil prices would go down, when Dutch disease effects limited the domestic capacity of production and created shortages in the supply chain of consumer goods (Vera, 2015). By mid-2014, when oil prices started to crumble, Venezuelan public finances were already handicapped and on a steady course to a breakdown.…”

“…As such, it shows how the effects of commodity price cycles on macroeconomic performance depend on existing democratic institutions (Vera, 2015). Hence, Venezuela has been for long characterized as a Petro-State and a rentier economy, whose fiscal profile has been generally weak and exhibits a long history of indiscipline and pro-cyclicality (Moreno;Shelton 2014;Talvi;Vegh 2000;Ochoa 2008;Puente et al 2006;Zambrano Seguín, 2010).…”