Lessons From Venezuela: Thriving in a Post-Deflationary Barter Economy
Plagued by a lack of necessary resources, governmental oppression and a completely decimated economy, the citizens of Latin America’s once most thriving nation have been in survival mode for soon nearly a decade. As we empathise with the plight of Venezuelans from the bottom of our hearts, there is also much that we can learn from this unfortunate situation, thinks Thomas Hughes.
In fact, it isn’t the first time that a show-stopping crisis has completely broken a country. Such instances have happened in contemporary times with nations like Yugoslavia, Zimbabwe, Hungary and the Weimar Republic. Considering that Germany has warned its citizens to stockpile food in recent years, it isn’t a long shot to contemplate more countries collapsing under the weight of reckless Quantitative Easing programmes that have been initiated by Central Banks worldwide. So, as the saying goes, it’s better to be safe than sorry!
Let’s take a look at how Venezuela got to its breaking point, what are some of the biggest challenges that its people face in times of crisis, and how can you possibly prepare to survive and even thrive if it ever happens in your own country. Read on to learn more about the collapse of Venezuela and what lessons we can draw in order to prosper in a post-deflationary barter economy.
THE ROOT OF CRISIS IN VENEZUELA
Corruption, hyperinflation and reckless mismanagement of resources…For several years now, Venezuela has suffered the worst economic and social collapse in modern history, despite having the world’s largest oil reserves. Its political crisis is rooted in a series of economic failures that have plunged the country into this disastrous humanitarian catastrophe. Today, Venezuela is left with two presidents playing tug-of-war, while thousands of citizens continue to go out on the streets in protest.
Though Venezuela used to be a thriving nation, its wealth primarily came from the petroleum trade. Unfortunately, the government has never sought to diversify its economy and in 1998, just before the arrival of Hugo Chavez in power, oil accounted for nearly three quarters of the country’s exports, while today it represents almost 95%. Being this reliant on a single resource didn’t fare well for the country. When oil prices began to fall in 2014, the country’s economic situation deteriorated rapidly and it was ill prepared to survive such a change. On top of that, the government maintained uncompromising control over everything, doing whatever it pleased. Chavez’ heavy focus on nationalisation had chased away foreign investors and his failure to invest into other sectors has lead to this unfortunate outcome. With every area beside oil left ignored, Venezuela has suffered issues like constant power outages due to a decaying electrical infrastructure.
The fact that it possesses the world’s largest oil reserves has been tainted by irresponsible mismanagement and excessive reliance on that one resource. At first, the wealth of petroleum has allowed Chavez to finance massive social programs, which has greatly lowered the poverty rate of the population in the first decade of the new millennium and made him quite popular with the people. However, the oil infrastructure was badly maintained and it remains in a despicable condition today. Seeing as Chavez had fired many engineers of PDVSA - the national petroleum company, to stifle a strike in the midst of the last decade, Venezuela was forced to be dependant on the United States for refining its oil, which, in turn, made the country susceptible to American sanctions that weigh heavier than ever on its economy today.
Venezuela’s crisis is also rooted in a system where corruption is nothing short of the norm among government officials. Upon ascending to power after Chavez’ death in 2013, Nicolas Maduro has given full control of PDVSA and the economy to his generals. Of course, the greedy and inexperienced officials only hastened the fall of the oil giant, which was the sole backbone of the Venezuelan economy for over two decades. Pair it to the corruption, extensive bribes and tax evasion, and you’ve got a recipe for disaster!
On top of that, the Bolivar (Bs.F - Bolivar Fuerte, ironically translated as “strong”), has become completely worthless. Since 2013, the country was facing exponentially rising inflation. Actually, according to the International Monetary Fund (IMF), Venezuela’s Hyperinflation Rate is projected to hit 10,000,000% this year. With a minimum monthly wage of 18,000 bolivars per month as of January 2019, which translates to $6.70 as reported by CNBC, a Venezuelan can barely buy enough meat for a week. Needless to say, this situation has completely annihilated the middle class and plunged the citizens into extreme poverty, which only contributes to the already deteriorated situation in the country.
All of these factors have made the Venezuelans’ everyday lives particularly difficult. Every day, the struggle to feed and care for themselves becomes increasingly unbearable. Toilet paper, soap and hygiene products are thus widely unavailable, because the government has failed to develop those markets while focusing almost exclusively on petroleum. As a result, the country is experiencing a resurgence in diseases like measles, malaria and dengue due to subpar living conditions and limited access to medical support. Those who are lucky enough to have family abroad manage to receive foreign currency and are able to purchase necessities on the black market. Others seek refuge in neighbouring countries, with well over 2 million people fleeing Venezuela since 2015, mostly traveling to Colombia or Peru.
WHAT DO YOU NEED TO THRIVE?
So, theoretically, if your own country falls into such a crisis - which, unfortunately, isn’t unlikely considering the wobbly foundation of debt and fiat currency upon which rests the global economy - what can you do to survive and even thrive? First and foremost, it’s necessary to stockpile your resources, because as soon as a crisis affects your entire sector, a shortage of basic necessities is bound to occur. Whatever type of crisis it might be, even if it doesn’t directly affect the production of goods and the shortage is totally artificial, you want to stay safe and make sure that you and your family have everything you need.
Imagine if the same thing happens with food, which is a vital need. Just as it occurred in Venezuela, in New Orleans during Hurricane Katrina, or in Haiti, panic pushes people to buy necessities en masse and when the supply can no longer satisfy the demand, hunger mercilessly takes over. Customers start shoving each other in the stores, long hours of lines lock people waiting for provisions, cargo is diverted and resold on the black market… It is a total mess! Therefore, it is a smart move to preserve resources at home before all hell breaks loose.
Seeing as we would likely stockpile our necessities bit by bit, unless you have a big budget, it makes sense to begin by storing items that do not expire, as it will help avoid unnecessary waste. For starters, it is a good idea to debunk the myth of “Best Before” dates. Often, these dates are fixed in an arbitrary manner that seeks to force people to replace their products and buy new ones quicker. Therefore, they are often irrelevant (unless you have opened the can), but do pay attention nonetheless! What do we keep then?
When it comes to nutrients, aim for dehydrated and freeze-dried foods, beans, rice, pasta, bread, tuna, canned foods and oils. What you are primarily looking for is optimised portability, long shelf life and bulk meals.
You will most likely need to have something done and you cannot rely on otherwise available services when resources and money are short. Essential in your arsenal would be tools like screwdrivers, drills, hammers, nails, scissors, batteries, torches, two-way radios and knives. A source of light is never a bad idea, so keep some lamps in case your electricity goes out like it often does in Venezuela!
You do not want to be using dollars instead of toilet paper, so do procure rolls, toothpaste, razors, soap and sanitary towels. If you can get your hands on a few medkits, even better!
After the destruction of a currency, these would work in place of local money: they can be items such as whisky, scotch, rum and alcohol, soda, cigars & cigarettes, light bulbs, chocolate, gold, and silver all make for valuable barter currency if you need to acquire other products.
In the end, you may end up in the problematic situation of The Coincidence of Wants. Normally, you would not trade a tractor for a chicken, or a horse for a loaf of bread- unless you need the latter and the other party needs the former. Staying ahead of the crisis means getting your hands on everything required before shortages occur. EG