Gabriela Calderón de Burgos remembers when "Saudi Venezuela" ceased to be such and became one of the poorest nations in Latin America.
In a BBC article entitled "What was Black Friday and why it marked the end of 'Saudi Venezuela'", historians and economists commemorated the 40th anniversary of the devaluation of the bolivar, announced on February 18, 1983 by then President Luis Herrera Campins. Until that day, a fixed parity of 4.3 bolivars per dollar had been maintained for a decade. At that time, the savings of the financial system were liquefied when they lost 70% of their value. After that measure, foreign exchange controls were imposed with three exchange rates.
The article explains that "The devaluation showed that the growth recorded in previous years was sustained by public spending, which promoted a port economy based on the importation of goods. And that the millionaire investments destined to diversify the productive apparatus had not achieved their objective".
When President Herrera Campins came to power he said that he received a "maladjusted economy". He exclaimed "I receive a mortgaged Venezuela!" According to economist José Guerra, the seeds of the disaster were to be found in the previous administration, that of Carlos Andrés Pérez. The social democratic leader had nationalized oil in 1976 and this meant an important injection of resources for the state. With his "Gran Venezuela" project, mega infrastructure works and huge state industrial complexes were built, the bureaucracy and the series of subsidies granted by the government grew significantly. All this was possible thanks to the oil price boom. When the oil bonanza came to an end, the Pérez government resorted to indebtedness and tripled the public debt. Sounds familiar?
Herrera Campins tried to correct the course by reducing spending between 1979 and 1980. But no one wanted to hear about austerity. Without a majority in the assembly and without the backing of unions or businessmen, Herrera Campins stopped. External factors such as the interest rate hikes at the Federal Reserve in 1979 and 1981 made financing and servicing of the existing public debt more expensive. Add to that Mexico's default in 1982, which also had its populist leader prior to the debacle in Luis Echeverría, punished the other Latin American debts. The 1983 devaluation led to high inflation and greater discontent.
That, in a nutshell, is the story of the collapse of what was until a few decades ago the most prosperous nation in Latin America. In this story, we can replace the proper names and tell the same story of several nations in the region. Ecuador, in particular, can look in that mirror considering that we have also suffered the maddening effects of the oil bonanzas. Before the rise and fall of Venezuela, we saw the rise and fall of Argentina. After the Venezuelan story, we have seen in recent years what seems to be the beginning of the decline in Chile.
Here in Ecuador, the story is already being repeated that we need to return to the good times of the great leader, ignoring, once again, that the roots of the current problems lie in continuing to wait for a redeemer to miraculously rescue us, without our effort and sacrifice. Let others pay, let others work, and let others take charge.
This piece was originally published in Spanish in El Universo (Ecuador).