The (encrypted) lessons from Venezuela

Venezuela is a country blessed with oil reserves like Saudi Arabia, but with a “failed” political system.  One symptom of this failure is the reasonable suspicion that elections have not been for real.  This was probably the case long before Hugo Chavez came on the political scene.  But more importantly, the economy has also been in bad shape, and Venezuela does not attract foreign investment the way other better-managed economies in Latin America (such as Colombia, Chile, Brazil, or Mexico) have.  However, Venezuela has the saving grace of producing world-class competitors within Donald Trump’s empire.

Venezuela has for a long time maintained a fixed legal exchange rate along with a parallel (black market) rate.  It is no surprise that the black market rate generally reflects the vagaries of Venezuela’s domestic financial policies as well as the (in)stability of the incumbent governments.

So, what happens if the political system in the Philippines fails?  Will the economy remain robust? Will we go the way of Myanmar? Is Venezuela a harbinger? There are no easy answers.

While some reflect, some others will act in ways that  cannot be predicted (in another post, I argued that economists can’t predict).  Perhaps we are entering into “interesting” times.

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