We've Seen This Before

When I told my wife, The Doc, that I intended to compare Venezuela today with Mexico during the Revolution, she was immediately supportive and enthusiastic.

“Who in Hell would want to read about that?” she asked.

Hopefully, you. 

It was Karl Marx who said: “History repeats itself, first as tragedy, second as farce.”  In 1915, Mexico descended into a violent and bloody revolution that devastated the country, easily qualifying as a tragedy   Today, Venezuela appears to be starting the process all over again, a sad farce.  Below, are some comparisons of the two countries that seemed pertinent, at least to me.  Venezuela is on the left, Mexico is to the right.

In 1915, President Victoriano Huerta—pictured at right—was rapidly losing control of Mexico.  For decades, the country had been led by a Porfirio Diaz, a dictator who skillfully co-opted power from opponents and used the mineral wealth of the country to finance his one-man rule.  After Díaz was finally deposed, a freely elected (and innocent) president did not last long before being murdered by Huerta, a follower of Diaz, who then seized power and attempted to rule.  Unfortunately—for both Mexico and for himself—he was not equal to his predecessor and the country descended into war.

From 1999 to 2013, former military officer, Hugo Chavez, was Venezuela's leader.  Despite vast income from petroleum, Chavez ruined the country’s market economy and moved the country closer to socialism while eliminating most civil rights.  Upon his death, his hand-picked successor, Nicolas Maduro—a former truck driver and labor leader—took over as president.  Today, Venezuela may be the "richest poor" country on Earth.

As the people of the Mexico turned increasingly against him, President Huerta decided to use the military to maintain power.  He told his Congress that he would have peace at any price, meaning he would spend enough to make the army big and powerful enough to crush his political opponents.  One of the reasons the eventual revolution became so violent and bloody was that Huerta greatly expanded the military, whose members frequently deserted and took their newly-purchased weaponry with them.

Eventually, Huerta began conscripting incredible numbers of men, sometimes by simply picking men out of crowds at fairs or public events.  At one point, over 180 priests were conscripted and forced into service (even the sixty who were found to have venereal disease).

Maduro has a small, but fiercely loyal army.  During the Chavez rule, the military attempted a coup, and when it failed, Chavez ruthlessly purged the army of all but the most intensely loyal military leaders.  Since the army is now not large enough to quell the growing public demonstrations, Maduro has begun arming citizen militias to help put down the opposition. 

President Huerta rapidly lost control of the situation, so he suppressed newspapers, arrested men in wholesale lots, and began using assassination squads to eliminate his enemies.  When the National Assembly refused to back his actions, Huerta dismissed the assembly and arrested most of them, too.

In the last general election, parties opposing Maduro’s Socialist Party won a majority in the National Assembly.  The Supreme Court refused to seat enough of the newly elected officials that the opposition was denied a majority.   After months of public protest, the politicians were finally seated, but the Supreme Court stripped the body of all legislative powers and Maduro ordered the treasury to withhold the Assembly’s paychecks.

While Chavez had already closed most opposition newspapers and radio stations earlier, President Maduro has found a few news outlets to target.  CNN en Espanol was shut down recently, and the government refuses to let the New York Times reopen their office in Caracas.  A lot of news reporting about Venezuela today comes from neighboring Colombian or Brazilian-owned news sources.

You can easily imagine what all the fighting did to the people of Mexico.  As trains were used exclusively for military transport, crops rotted in the fields since there was no way to transport them to the cities.  With so little food available, food prices climbed dramatically.  With tax revenues falling, Huerta increasingly turned to his treasury department's printing presses to finance his government.  The resulting inflation eliminated the savings of the small middle class and the lack of hard currency effectively destroyed what was left of the economy.

When Maduro came to power, the country had $30 billion in reserve, despite falling oil revenue.  Petroleum accounts for over half of the country’s annual GDP.  Today, the cash reserve has shrunk to less than $10 billion, which is just enough to meet this year’s debt payments.  To finance operations within the country, the government printing presses run around the clock and to  discourage the black market, Maduro refuses to print bills larger than 100 Bolivars.  (This is despite the fact that they actually cost more to print than they are worth—Maybe, this only makes sense if you are a socialist.)

Shoppers lug suitcases of bills to stores, where clerks cannot fit the wads of bills into cash register tills, so they dump them into boxes.  There is little fear that the notes, individually worth about the same as fast food napkins, will be stolen.

While employment is dropping, there is one occupation that is growing in number:  You can now be paid for standing in line for someone waiting to buy food or medicine.  It has been estimated that in any given line, half of those waiting are bachaqueras (black marketeers) or those being paid by them to hold a place in line.  Fully half of the limited food available in the government run stores ends up being sold on the black market by people whose legal salaries might be less than the roughly $25 a month—the official minimum wage.  Large numbers of the middle class—doctors, teachers, accountants—have quit their jobs and turned to the black market to earn their living.

Since food could not be sold or transported, and since increasingly large armies stole livestock and conscripted farm workers, agriculture in Mexico crashed.  Hundreds of thousands of Mexicans starved.  An even larger number fled the country, most of them moving north into the United States.  Without sufficient workers, mines shut down and quickly flooded.  Many factories and railroads became military targets and were destroyed in the wars that engulfed Mexico for years.

Venezuela has large agricultural assets, but they have not been encouraged lately.  With a seemingly endless source of oil revenue, it was simpler for the country to just import food.  Until recently, more than half the country’s food supplies have been imported.  Today, food shortages are acute.  The average Venezuelan has lost 20 pounds since Maduro came to power.  This is called the ‘Caracas Diet’.  As you can see from his photo at right, Maduro is not on the diet.

Venezuela should be ranked among the more prosperous countries, since it possesses the world’s largest oil reserves, surpassing even Saudi Arabia.  Both countries, charter members of OPEC, have roughly equal populations.  And that is about where the similarities end.  (Well, they are also the two cheapest places on Earth in which to fill the tank of your car.  In Saudi Arabia, a gallon of gas costs about $.75, while in Venezuela it will set you back about a nickel.  Actually, it is less than four cents a gallon.  In Venezuela, gasoline is more prevalent and cheaper than drinking water.)

Venezuela also has the world’s fastest contracting economy, the second highest murder rate, horrific shortages of medicine, and rising rates of malnutrition that rival the worst countries of Africa.  The IMF is predicting that inflation, currently in triple digits, might reach four digits by the end of this year.

As the economy of Mexico shrank, the various armies began looting the property of foreign-owned factories and warehouses.  Before long, the Mexican government nationalized (the polite way of saying ‘stole’) foreign-owned property.  Without new investment in those factories, production halted.  Up to that point, Mexico had been the producer of a significant amount of the world’s silver, and when production dropped there, it caused a spike in the commodity’s price.

Between Hugo Chavez and Nicolas Maduro, it might be easier to list the foreign-owned assets that have not been nationalized.  Fully 10% of the S&P 500 firms have lost property in Venezuela.  Ford, IBM, McDonalds, Coca-Cola, Pepsi, Mondelez (Oreos), United, Lufthansa, Delta, American Airlines, and DirecTV have all lost property, and cut back operations in Venezuela.  This week, the assets of General Motors were seized, eliminating the jobs of 2,678 employees.  There are signs that the next corporation whose assets will be “liberated” are those of the Spanish communication company, Telefonica.

With many of the essential oil field services provided by the same foreign corporations who have had their assets increasingly attacked by Maduro government, petroleum production has begun to diminish, particularly on the offshore oil platforms.  As oil production falls, so does income to the Maduro government.  One can easily predict that there will be ecological disasters in the Venezuelan oil fields in the near future.

After Mexico’s violent revolution, it took decades before the country had a stable government.  If Venezuela follows the same pattern, the same thing might well happen.

Or maybe not, perhaps this is all coincidence.  Remember, this historian is essentially just a poor dumb ol’ country boy.  As Mark Twain supposedly said—and absolutely did not—“History doesn’t repeat itself, but it does rhyme.”