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- [00:01]
PJ Vogt
Hi. Quick note before we start this week. While this episode is about Venezuela, a country that recently found itself the focus of our country's confusing ADHD inspired imperial ambitions. Greenland has also landed in a similar spot and very surprisingly, we happen to have reported an hour long documentary about Greenland. I went to visit there a few years ago to a melting glacier on a trip with climate change activists and crypto people. Our Greenland story contains a lot about Greenland's history, just what the place is like. It's very strange, even ideas about resource extraction there. The story is absolutely one of my favorite things I've ever gotten to work on. If you want to hear it, it's called the End. We'll throw a link to it in our show. Notes that is Greenland this week. Venezuela after this short break, this episode is brought to you in part by LinkedIn. If you've ever hired for your small business, you know how much pressure there is to get it right. Which is why you need LinkedIn jobs. They're stepping things up with their new AI assistant so you can feel confident you're finding top talent that you can't find anywhere else. And those great candidates are already on LinkedIn. In fact, employees hired through LinkedIn are 30% more likely to stick around for at least a year compared to those hired through the leading competitor. When every hire matters, that kind of reliability is huge. Hiring doesn't have to be complicated with LinkedIn Jobs AI assistant. It filters applicants based on the criteria you set and suggest 25 great fit candidates daily so you can invite them to apply and keep things moving. Hire right the first time. Post your job for free@LinkedIn.com pjsearch then promote it to use LinkedIn jobs new AI assistant, making it easier and faster to find top candidates. That's LinkedIn.com pjsearch to post your job for free. Terms and conditions apply. RingCentral will completely transform the way you work. It gives you built in AI across all your business conversations. Your phone System has an AI receptionist that answers calls 24 7. Your video meetings have AI that takes notes instantly. Even your contact center has AI so you can help customers faster. It all comes together in one reliable platform for effortless AI communications. See for yourself@ringcentral.com RingCentral Voice of your business. Hello search engine listeners. This is the final part, Part two of our very fascinating, in my opinion, history of Venezuela told to us by the platonic ideal of a history professor Alejandro Velasco. If you've not yet heard part one, please go listen but if you have, we pick up our story where we last left it. The country's president, Hugo Chavez, star of the TV show Allo Presidente, is in an extremely strong position. The year is 2005.
- [03:21]
Alejandro Velasco
Now Chavez has control over the military, control over the national oil industry, international credibility, democratic credibility, and control over the Congress, just at the time when oil prices are hitting their peak.
- [03:39]
PJ Vogt
Just an immense amount of power.
- [03:41]
Alejandro Velasco
It's complete power is what it is. It is total power, which eventually will be the Achilles heel and the reason why Chavismo fails.
- [03:54]
PJ Vogt
So today we're going to talk about that failure. We're going to chart a series of really heartbreaking mistakes. Chavez will make, many of them himself. The US will contribute at some crucial moments as well. And as we follow the story, we'll see a country gripped by the strange amnesia Alejandro Velasco described in episode one. A place that during the boom times, seems to almost forget the bust, forget that everything that rises eventually falls. So to begin, chapter one, the socialist oil company. Even before Chavez, Venezuela had been engaged in a multi decade project of nationalizing its oil industry. PDVESA, the state oil company, had begun back in the 1970s, but before Chavez. It's a more complicated picture. You have other foreign oil companies freely operating in Venezuela. And Pervasa itself operates fairly autonomously from the whims of the president. Chavez will change both of those things. One big change he'll make is to tell multinational oil companies like ExxonMobil they have to give Venezuela a 60% stake in their Venezuelan operations in order to stay in the country. The companies that resist he expropriates their assets. The ones that stay are made to understand that their relationship to Venezuela will be very different. Now, here's Alejandro.
- [05:21]
Alejandro Velasco
So it was a much more contentious nationalization process, not only because of the finances, but because of the implication that now foreign oil companies are no longer partners in Venezuela's oil industry. Now, if anything, we are clients of Venezuela's oil industry and on their terms. And so the ones calling the shots are not just the oil industry executives. It is in very important ways, the whims of one person, Hugo Chavez.
- [05:50]
PJ Vogt
And so, with them out of the picture, largely with the oil industry nationalized, how well does it run as a nationalized industry?
- [06:02]
Alejandro Velasco
The major problem is that once you nationalize, you of course take complete ownership over the profits. But unlike in a process of cooperation with private partners or contracting, you now assume all of the risk and all of the investment costs as well, which also imply, of course, maintenance upkeep improvements, et cetera, et cetera. Right. Now, again, in context of high oil prices, you can possibly do this, but because of the absence, number one, of accountability, no institutional accountability, and also because of the stated project of we are going to use literally the oil wealth and redistribute it as much as possible into the population, the incentives are set such that the primary focus of the oil industry is not reinvestment in itself, but reinvestment in the nation as a whole. Now you think that's not a problem if it's the nation's oil, shouldn't that be the end goal of a national oil industry? And I think the answer is yes, but to a point, not at the sacrifice of the industry itself.
- [07:13]
PJ Vogt
And so what happens to the oil industry? How quickly does it fall apart?
- [07:18]
Alejandro Velasco
The decline of the industry had begun as soon as the oil industry strike in 2002 and 2003. And as we talked about that moment was one marked by the firing of 18,000 long standing, mostly professional engineering personnel. Right. So for instance, you started to see things. I'll give you one small anecdote. So growing up, every other weekend we would go to the beach from Caracas, and there was one beach in particular that we liked to go to. And to get to this beach, you had to go through one of the primary oil refineries in Venezuela. And I have a very distinct memory imprinted in my mind of you drove by this refinery and there was a big placard on the side of the road that said days since the last accident. And it was something like, you know, years worth of days. Yeah. And then I remember going back there years later during this time, and the placard was gone. So like many accidents would happen and some of these would be deadly. Of course it's hard in part because of the visibility of the oil industry in Venezuela. It's not something that's out of sight. It's quite plain when an accident happens, you know about it.
- [08:35]
PJ Vogt
Right.
- [08:36]
Alejandro Velasco
And so, you know, you started to see like explosions in refineries, you started to see leaks in the lake, things that hadn't really happened, or at least we didn't know about.
- [08:44]
PJ Vogt
Yeah.
- [08:45]
Alejandro Velasco
And so that's contriving to give a sense that the kind of, you know, high level of professionalism and expertise is no longer there, but it really begins to kind of kick into over drive. Right around 2008 and 2009 again, the mission of Pedevesa has shifted dramatically. And it's also, of course, now grown massively in size. We talked about how the entire oil industry before the strike was around 42,000 people and almost half of them were fired summarily by 2007, 2008, because of the incorporation of all of these social programs within the scope and the remit of the oil industry. Now, the oil industry employed, directly or indirectly, hundreds of thousands of people, right? And so if you send your kid to school, you get this amount of money. If you yourself go to school to learn how to, you know, do whatever, you get this amount of money, right? So everyone is tapping into the state quite directly in this moment, and the reinvestments into the oil industry become secondary.
- [09:50]
PJ Vogt
We're going to come back to the oil company, to Pedda Vesa later to see what happened to the state owned, state run oil company when prices inevitably began to fall. But in our story, it's still 2008. Prices are high and the bus time is unimaginable. The best estimates I've seen put the total value of oil revenues that came into Chavez's government during those boom years at around a trillion dollars. A trillion dollars in revenue flowing into a country whose population is a bit higher than the state of Florida's. As one academic put it, the largest resource windfall in the history of Latin America. And Chavez's power meant that he would get to direct that cash wherever he thought appropriate. Which brings us to chapter two, pipe dreams. Alejandro said there are many examples from these years of wild, blank check government infrastructure ideas. But there was a specific story he wanted to share.
- [10:49]
Alejandro Velasco
I'll tell you one that brings together this domestic component of trying to refashion the nation now under socialist lines, beginning in 2006, 2007, with larger hemispheric ambitions. So in 2006, 2007, there are now an array of leftist presidents elected throughout Latin America, some of them neighboring Venezuela, Ecuador, Bolivia, Brazil, Argentina, all the way down to Chile. And again, this is a region that is very rich in natural resources, one of them being gas. Natural gas. And so the idea in terms of refashioning solidarity and alliances, no longer just around material interests, but around a shared purpose of political and ideological solidarity is made manifest in a project to build a continental gas pipeline that is going to stretch all the way down to Argentina and go all the way up to Venezuela. And then from there, gas can be exported elsewhere. And all the various countries that have natural gas would just pipe their gas into this pipeline and then ship it off to the benefit of the entire continent.
- [12:10]
PJ Vogt
Okay, so it's going to be a national gas pipeline going through the continent. And the idea is that it's like, the same way countries are internally sharing their natural resources. It's like it's towards a more communal idea of this as an export from the region to the rest of the world.
- [12:28]
Alejandro Velasco
Exactly. It's an effort to create a united Latin America, which is Bolivarian in nature. Right. It goes all the way back to Bolivar's ideas of a Gran Colombia of, you know, Latin American nations that come together as a confederacy of nations. Obviously, there's tragedy involved in the billions of dollars that were misspent in these kinds of projects. But there's also kind of, you know, dark humor in the idea of the jokes tell themselves. Like, the pipe dream literally, is a pipe dream. Right. Of this, you know, pipe that I remember in Allo Precienta, this, like, Sunday TV talk show that Chavez had where he would bring out maps and then he would show these maps of the continent and tell you exactly where the pipeline was gonna go, and they'd explain the geography and, like, well, we can't go through here because the terrain does not lend itself to. So we have to go through here. But we're gonna preserve nature. Don't worry about that. Nature's gonna be fine. Of course, environmentalists were sounding the alarm all along, but as you were watching this, on the one hand, you had this idea of. As an historian of Venezuela, this is exactly the magical thinking that has, for so long, put us in really precarious moments when we feel that the future is limitless. This is it. We're watching it. And yet at the same time, you're like, wow, that's pretty fucking awesome.
- [13:54]
PJ Vogt
Like, maybe this time. Maybe.
- [13:56]
Alejandro Velasco
Yeah. And, you know, as I look back upon that moment, I'm like, wow, I can read all about the magical state, but here I am feeling the enchantment of it. Yeah, right. The grandiosity of it, like, in a kind of weird, asymptotic relationship. The bigger the design, the bigger the ambition, the more seductive it is, because.
- [14:18]
PJ Vogt
There'S just something intoxicating about. Maybe it's impossible, but what if it's not?
- [14:24]
Alejandro Velasco
Yes. Maybe this is the time. Yeah, right. Economic principles be damned, geography be damned, history be damned. Maybe this is the moment.
- [14:37]
PJ Vogt
And it's like, in a place where there's been so much disappointment, the way you revive people's capacity for hope isn't through smaller promises. It's through bigger promises.
- [14:47]
Alejandro Velasco
Right.
- [14:48]
PJ Vogt
What ends up happening to the gas pipeline? Like, why was this utopian infrastructure project.
- [14:54]
Alejandro Velasco
Not completed in the same way that many of These projects end up being not completed. It dies with a whimper, not a bang. But very soon, they realize the actual practical impossibility of the project. The amount to spend to upkeep was far larger than any potential profit that it could return. And so, for as many shows as I remember Chavez bringing out the map and telling us exactly where the pipeline was gonna go, I remember no shows where they said, and now it's no longer going to happen.
- [15:29]
PJ Vogt
I see. Yeah, it just big promises, and then once it gets hard, just, like, quietly just, like, make other big promises.
- [15:37]
Alejandro Velasco
Exactly.
- [15:38]
PJ Vogt
There were a lot of projects like this, like, just billions of dollars spent on, like, ideas that sounded great, but either were not well executed or maybe could never have been well executed. What was Chavez's understanding of this? Like, how much did he understand the waste that he was presiding over? How much did he believe the promises he was making?
- [16:04]
Alejandro Velasco
I mean, obviously I don't know because I'm not in Chavez's head, but you know, at least from everything that one has access to, both in his public pronouncements and what he wrote and speeches that he gave and interviews, et cetera, he was a true believer. And I think that inspired among his supporters, a sense of confidence.
- [16:29]
PJ Vogt
There's a book I read that really describes what life in Venezuela felt like under the spell of this confidence. It's called Things are never so bad that they can't get worse. The writer, journalist William Newman, actually interviews a former information minister for Chavez. Part of this information minister's responsibility was Chavez's TV show A la Presidente. The information minister describes how when Chavez appeared on tv, they were constantly looking for good news he could take credit for on air, which often meant faking stuff, pretending a factory was ready to start production when it wasn't sprucing up a derelict farm so it was ready for primetime. According to this information minister, Chavez himself often didn't know that the victories he was presenting were gussied up or fake. The writer tells one insane story about yet another infrastructure project. This was the Bolivarian cable train, a transit project which was still under construction, but Chavez wanted it completed in time for an election. He wanted to ride the train himself on live tv. The European engineering firm who had been doing the construction said this was not possible, at least not on Chavez's timeline. One of his ministers went back to them and said, quote, no European engineer is going to tell the people of Venezuela what can and cannot be done, perhaps recognizing the implication here that they were at risk of losing significant amounts of government money. In contracts, the engineers changed their tack. They agreed for a million dollars to help create a fake train ride for Venezuelan tv. The solution was to attach a thin wire to the train, run the wire down the tracks to a winch. They'd hidden one of those devices that turns a wire like you'd use to pull a jeep out of a ditch. The train couldn't actually run, but with this winch, the idea was that they could fake it. So here's what Venezuelan TV viewers saw that day. Their president standing on a train platform, the train in the background, extolling the virtues of Venezuelan socialism.
- [18:30]
Alejandro Velasco
Socialimo el reyno de Diojen latiero Chavez.
- [18:34]
PJ Vogt
Is saying, this is only possible in socialism. The kingdom of God on earth, the kingdom of Christ on Earth. And then he tells the crowd to applaud because here's the train. The train, though, is barely moving, and so Chavez has to just keep. Keep vamping to kill time. Chavez is saying it's going slowly because this is just a test run. The real Bolivarian cable train, when it launches, will go much faster, 50 kilometers per hour. The train, meanwhile, finally arrives at the station. My Spanish is terrible, but even I can feel the effects of the political charisma of this president selling me gleefully on his somewhat dubious train project. Eight days after this TV appearance, Chavez would go on to win the election handily. It was later calculated that just this section of railway track, less than a milecost the country $440 million. At the end of Chavez's time in power, he'd leave Venezuela with its external debts quadrupled to about $150 billion. Alejandro says part of the reason that a lot of Venezuelans missed what was going on, it wasn't just that there was so much money that you could hide the waste. It was also that Chavez had many projects whose results were actually quite tangible. Government subsidized gasoline, pennies per liter, free apartments and free houses that Chavez would give away to citizens on tv. Cuban doctors brought in to give people better healthcare.
- [20:17]
Alejandro Velasco
Another project, for instance, Chavez funded this continental program to remove cataracts from people's eyes. And so people would travel from all over the continent. They would, you know, send Venezuelan planes or they would charter planes.
- [20:35]
PJ Vogt
Oh, it's not just Venezuelans. It's like people.
- [20:38]
Alejandro Velasco
Oh, Bolivia, Ecuador, Peru, Argentina, Central America, Caribbean. This was a continental project for people, certainly Venezuela, for people to come from elsewhere and have their cataracts removed. Right. Now that I think about it a little bit more, there was something about the metaphor of Seeing and of visibility. That was important to Chavez. You know, removing the cataract so you can see clearly. Right. The idea is that you live under conditions of misery only because you're unable to see the realities of the world. And if you just think differently and see differently, if you see people coming from all over the continent and being benefited in their health, if you know that you now have access to doctors that you didn't have before, sure, they're Cuban, but you have access to health. Like that is the promise of a different world, and it is made real. All the rest of it we don't have to worry about, because who does? We have so much wealth coming in that it's not a problem.
- [21:42]
PJ Vogt
Chapter 3, the People's Black Market 1 of the other dynamics I've read about, and I'm curious, it seems like it's tied to this moment, but correct me if I'm wrong, is that just the fact that there's this gusher of money coming from the state, it creates this incentive structure which is like you're almost a sucker if you're not mainly thinking about how to capture that money. Any other way you would apply your time or thinking or work would be silly when, like, this volcano of cash is coming from the government.
- [22:17]
Alejandro Velasco
That is such a good point. And let me. Let me confess something to you.
- [22:23]
PJ Vogt
Yeah.
- [22:23]
Alejandro Velasco
So, you know, we tend to think rightly, this is. We have lots of evidence that most of the social programs that Chavez implemented were directed at the poor or working classes. That is true. But one of the more expensive social programs that Chavez implemented was not a social program at all, but that benefited almost exclusively the middle class. And so the way that it worked is this. After the oil industry strike in 2002, 2003, Venezuela is under a liquidity crisis. It doesn't have dollars coming in. And so if you're a country that relies on this revenue that is internationally in the dollar, and that's what you use to then pay your state employees services, et cetera. And the way that you do that is by converting dollars into your national currency. And then there's also this fear of the economy tanking, and people are just sending their dollars abroad because they feel like it's a safe currency. What do you do? You implement currency controls.
- [23:32]
PJ Vogt
Right.
- [23:33]
Alejandro Velasco
And so that's what Venezuela does beginning in 2003, to forestall this capital flight that is happening as a result of the oil industry strike, compounded by the lack of influx of resources that are coming in. That is a perfectly both fine legitimate and in fact, necessary financial, economic tool in a moment of crisis. But when the crisis abates, they didn't remove the currency controls, they kept them. Now, why is that a problem? Because what a currency control does is say you only have access to this amount of dollars, for instance, in a given calendar month or calendar year. And at least when I was there at the time, it was $2,000 a year. As an individual, you have access to this. If you want more than that, you have to take out a special permission.
- [24:22]
PJ Vogt
Right.
- [24:23]
Alejandro Velasco
And if you want more than that, how are you going to get it? A black market.
- [24:28]
PJ Vogt
Right. It's like the state is saying, any Venezuelan can only exchange a certain amount of. What is the currency?
- [24:35]
Alejandro Velasco
Bolivar.
- [24:35]
PJ Vogt
What is the plural?
- [24:36]
Alejandro Velasco
Bolivares.
- [24:37]
PJ Vogt
Bolivares.
- [24:38]
Alejandro Velasco
Got it.
- [24:38]
PJ Vogt
So it's like if I were going to Europe and I wanted euros, you just go to a forex, you give a bunch of dollars, you get a bunch of euros. In Venezuela at the time, if I wanted American dollars, there was just a annual limit on what I could get. The problem being people, because people want to buy foreign goods, because they want to travel, because they have so much money and the country does not make that much like goods, they are then just getting the extra dollars on the black market.
- [25:05]
Alejandro Velasco
Yes, exactly. So they implement something called cadivi divisas. Divisas is currency. Right. So this is the entity, the national entity that controls all of the literal dollars and decides who gets access to those dollars.
- [25:24]
PJ Vogt
It's such an abusable system.
- [25:26]
Alejandro Velasco
Are you kidding me? And so you have these cards, these Kadivi cards, right. That whenever I would go back to, you know, Venezuela for research or to visit family or whatnot, you know, you would come back with these cards that had a certain amount and each one was like, I think they increased it to 2,500 at some point. Right. And so what would happen? There's all sorts of scams. And let me just preface this by saying, like, the reason why I was making a confession. Yeah. Is because this is primarily accessible to the middle classes, people who, you know, have relatives, family abroad, people who are studying abroad, whatever the case might have. So you need actually access to dollars to travel and the rest of it. So this is primarily a middle class social program billed as a currency exchange system. Right. But yes. So you'd get this card and so I'd go and people would buy the card with a $2,500 limit at the official exchange rate. Call it, I don't know, 10 to 1.
- [26:25]
PJ Vogt
Yeah, right.
- [26:26]
Alejandro Velasco
But because the black market dollar is the one that reign supreme. That black market dollar might have been 1,000 to 1. Oh, okay, so I have bought that dollar at 10 to 1, but I can sell it at 1,000 to 1. So what would happen? Confession. So people would give me these cards and then I would come to the States and I would get say 2,500 bucks worth of it. And then I'd come back with the cash they have now, the cash that they bought at the official rate, 10 to 1. But they can sell that $2,500 in cash at the black market rate for 100 to 1. 1,000 to 1. It is a massive money making machine that most people in the middle class take advantage of, including me.
- [27:14]
PJ Vogt
So you would come back from studying with your allocated 2,500 bucks and then how much could you, what was the profit if you sold 2,500 bucks back then on the black market, you would have.
- [27:24]
Alejandro Velasco
I mean it fluctuated over time. Right. It might have been 100 to one or it might have been a thousand to one at like the end of the kad.
- [27:31]
PJ Vogt
That's crazy.
- [27:31]
Alejandro Velasco
Yeah, yeah. I mean, I guess I'm just like spilling it all open right now. But so you know, growing up, so we were. My family was a solidly middle class family that was aspirational. Right. And so my parents put a lot of their money into making sure that my sister and I had really good schooling. But that also meant that, you know, we didn't have like a really fancy house. We lived in a small apartment that we did travel. But it was, you know, travel not to like fancy destinations per se, but it was where we had friends and family. And we also didn't go to like fancier restaurants. When I went back and I had access to all this money that I had, you know, one of my things was like, I'm going to go visit all those restaurants that as a kid we never got to go to.
- [28:17]
PJ Vogt
Right.
- [28:17]
Alejandro Velasco
Because now I can go there and like eat like a king.
- [28:19]
PJ Vogt
Yeah.
- [28:20]
Alejandro Velasco
And I did.
- [28:21]
PJ Vogt
And my understanding is that like this was just happening throughout society. Like you saw a lot of people taking advantage of this. It was like such a huge opportunity that it perverted anyone's desire if they had access to this to do anything else.
- [28:36]
Alejandro Velasco
Yes. But also, and this is, I think a really crucial part, the influx of petrodollars is such that it could sustain both things at the same time. I didn't feel at the time, and of course this is kind of ex post justification. I think it didn't feel at the Time like I'm milking off a corrupt system. And this is really problematic. Felt like, well, I can do this. And social programs are still thriving, right? Like public health is still accessible. It's not a zero sum game, it's additive. Right. And so in a weird way, the incentives that are created are less in terms of. And again, this could all be just exposed justification, but at the time it's the incentives are less about, I need to get as much as I can right now because if not, somebody else will get it. It's like it's just there. Why would I not?
- [29:30]
PJ Vogt
But so it's like my view, which I think is a little bit wrong, is that in this socialist country people were behaving like ravenous consumerist capitalists. It's like what you're saying is, no, actually there was so much money that no one had to make a choice. You could sort of like just slightly ransack this opportunity, but also see that these social programs for the poor were being funded. And if you weren't thinking too hard about the future, about what happens if the price of oil drops or what happens if the oil industry, which is being run very poorly as a piggy bank, just collapses under that mismanagement as well. It felt for a moment like no contradictions needed to be resolved. Everything was possible because money was nearly infinite.
- [30:17]
Alejandro Velasco
It didn't feel like it was any kind of contradiction.
- [30:20]
PJ Vogt
Yeah, I mean, it's like the problem sometimes of populist leadership is that it sort of says everything is simple and you don't have to make trade offs. And sometimes that can be true for a little bit, but it's never true in the long run.
- [30:36]
Alejandro Velasco
Right. The problem in Azueta is that it lasted for long enough to feel like it could go on forever. Right. So previous oil booms lasted maybe four or five years and then the party was over. This seemed to keep going and going and going until it didn't.
- [30:57]
PJ Vogt
After the break, the bust. This episode of Search Engine is brought to you in part by Square. One of the things I love about visiting my favorite local spots like Cafe Spaghetti and Red Hook is how smooth everything feels. Quick checkout, easy receipts, and sometimes even loyalty points. That's because they use square. Square is the easy way for business owners to take payments, book appointments, manage staff, and keep everything running in one place. Whether you're selling lattes, cutting hair, detailing cars, or running a design studio, Square helps you run your business without running yourself into the ground. Square works wherever your customers are. Take payments at a kiosk counter, website or with your phone all synced in real time. With Square, you get all the tools to run your business with none of the contracts or complexity. Why wait? Right now you can get up to $200 off square hardware at square.com GoEngine that's S Q U-A-R-E.com GoEngine run your business smarter with Square. Get started today. This episode of Search Engine is brought to you in part by Liquid iv. You know those moments when you're pushing through a project or a workout and think powering through is the way to go? This happens to me all the time. I won't be working on some big story, think that I need to not sleep and realize that the right thing to do is just to sleep. Hydration is kind of the same way. You can't perform your best if your body's running on empty. That's why I really like Liquid IV's Hydration Multiplier. One stick in 16 ounces of water hydrates better than water alone. Powered by Liv Hydro Science, it delivers three times the electrolytes of the leading sports drink, plus eight essential vitamins and nutrients. Everything you need to rehydrate fast. I keep a packet in my gym bag. I keep a packet in my bag when I go camping. Knowing I'm getting serious hydration makes a huge difference in my day. Rehydrate with better hydration from Liquid IV. Tear pour live more. Go to LiquidIV.com and get 20% off your first order with code search at checkout. That's 20% off your first order with Code search@liquidiv.com. Welcome back to the show. Chapter 4 Downward Spiral In December 2012, Hugo Chavez announces on television that he is ill. The plan was for him to go to Cuba to treat his cancer. It wasn't the first time this had happened, but this time he made sure to say that while he expected he'd be fine should anything happen, he wanted his deputy, Nicolas Maduro, to take over. This was the last time Chavez would appear on Venezuelan TV. Just a few months later, March 2013, a visibly distraught Maduro appears to tell the nation that Chavez is dead.
- [34:53]
Alejandro Velasco
Chavez had just won the presidency in 2012, won it again by a significant margin with a very powerful opposition at the time, I should say. And so he, when he dies, is actually very, very popular. His, you know, his funeral is attended by heads of states from many nations. And I feel like I can say this with some authority as a Venezuelan. This is so classic Venezuelan. Initially, when he dies like, you know what we have to do? We have to embalm him like Lenin. Oh, yeah, yeah. So he's preserved for posterity. And they talked about it for so long that they missed the window for embalming him. And so they couldn't embalm him. So they did the next best thing, which was build very quickly as this kind of mausoleum in place that overlooks the Presidential palace in Caracas. What follows from that initial week or so, or more than weeks of just frenzy and trauma and collective sense of loss, especially from his supporters, but also, I think, importantly of his opposition, for whom the idea of Chavez no longer being in the picture. Yes, I'm sure they dreamed of it, fantasized about it, but suddenly now was here. It was disconcerting to say the least, right? Especially more so after Nicolas Maduro, when he won snap elections just a month after Chavez's death with only a 1.4% majority. Contrasting that to what had been chavez's, you know, 13, 14% majority just a few months before, it was quite evident that not only Maduro did not carry the amount of popularity that could hold over or carry over from Chavez, but that the entire political system that Chavez had built was now exposed to be very precarious.
- [36:52]
PJ Vogt
Maduro, Chavez's handpicked successor, a former union leader, he not only lacked his mentor's charisma, he also just lacked the levels of popular support Chavez had had. It's actually something you see in the US the much less charismatic vice president being offered as the former president's new replacement. Despite all that, Maduro's opposition realized he'd still be hard to ever beat in an election. Because Maduro, like Chavez, controlled the state's resources, and because, like Chavez, he could strategically hand them out to gain supporters. At election time, he made moves like sending troops into Venezuela's version of Best Buy, detaining the managers, and forcing the stores to sell electronics at rock bottom prices. Seeing maneuvers like this, some contingent of the opposition decided that the real way to unseat Maduro would be either through insurrection or, at a minimum, widespread protests.
- [37:47]
Alejandro Velasco
And so the opposition, they stage a series of protests, really significant street demonstrations in 2014, which incur the wrath of the state, especially its police forces. What it does is it convinces the sector of the opposition that Maduro's government is now only driven by one thing alone, and that is to stay in power. And that's the primary dynamic that we're going to see, is take over all of what eventually becomes malorismo, especially when in 2014, oil prices collapse, so now.
- [38:22]
PJ Vogt
He can no longer give stuff away in the same way.
- [38:25]
Alejandro Velasco
And not only in the same way, in no way.
- [38:28]
PJ Vogt
So oil prices collapse, and under Maduro, it's really just like repression, repression, repression.
- [38:34]
Alejandro Velasco
And it creates a kind of vicious cycle where if people protest and we feel like we need to resort to repression to quell those protests in order to stay in power, that increases the incentives for me to remain in power, because the exit costs are really high. If I am ousted or if I'm removed from the presidency, I might be susceptible to a trial or to ending up in jail, et cetera, et cetera. Right? So, of course, at the same time, that increases the incentives of those who say, like, well, the only way that we're going to get rid of this government is to protest or take more radical action. And so you have this increasing. It's like a ratchet. We're just constantly ratcheting up the stakes of protest, repression. Repression increases exit costs, exit costs increases the amount of determination you have to get that government out of power, which in turn increases repression, which in turn increases exit costs, et cetera, et cetera. You go down this spiral of repression, protest, exit costs, repeat.
- [39:37]
PJ Vogt
And so it's like you have, like, political prisoners, you have people, like, routinely disappearing. This is also the point in my understanding where just mass migration out of Venezuela begins. Like, people who can leave, or were they already leaving, they had been leaving.
- [39:52]
Alejandro Velasco
In different waves in the past. Right. And anecdotally, and I just want to make sure that I emphasize that it's anecdotal, there's a strong correlation between class race and migration waves in Venezuela, such that the earlier waves, going back to even early days of Chavez, is primarily wealthier, professional, cosmopolitan elites. And then over time, different political events that entrench Chavez further in power. The elections in 2006 leads to another wave where some people, again going down the. The class ladder, make the calculation, well, there's really nothing left for me here, so I'm going to leave. Then in 2012, another wave of migrants. Then in 2014, after these repressive protests, another wave of migration. Right? But each one of these waves is going a little bit lower in the class hierarchy, such that by the time you get into the deepest fray of economic crisis, which really begins in earnest around 2016, and then kicks into overdrive in 2017 with the US sectoral sanctions against the oil industry, which had long been seen by Venezuelan observers and Venezuelans themselves as the kind of the red line that we didn't know the US dared cross the sectoral sanctions as the tool to try to just bring the economy to its knees and therefore affect regime change.
- [41:19]
PJ Vogt
Because even at a, at a, with oil prices now at a low, the country can still sell oil. The US wants the like global oil market to be, for there to be as much supply as possible. So the regime in Venezuela, people in Venezuela just didn't think the US would do oil sanctions. But then in Trump's first term, they do it.
- [41:42]
Alejandro Velasco
They do.
- [41:42]
PJ Vogt
Under the executive order, US persons are prohibited from engaging in small specified dealings involving the government of Venezuela and its instrumentalities. This includes state owned oil company Pedavisa. These prohibitions extend to transactions or activities.
- [42:01]
Alejandro Velasco
There's a vast literature on whether or not sanctions are effective to lead to political change and vast consensus in the literature, not unanimity, consensus is that they don't. The logic behind this kind of sanctions are meant to induce collective changes. So the greater the pain that is felt collectively, the logic goes, people will blame not the sanctions, but the people who are preventing the political change that are making the sanctions possible. Right. In this case, the leadership of the country. Right. And so the United States bets on a groundswell of opposition that will rise up. They can't come to Washington and protest, but they can go to Caracas and protest. And that's the idea.
- [42:44]
PJ Vogt
The problem being that oftentimes, if you look at what really happens with sanctions, is the domestic leadership does a pretty good job of actually focusing rage at the United States and just using repression to keep people in line.
- [42:56]
Alejandro Velasco
Absolutely. And in the government like Maduro certainly. But chavismos more broadly, which had long railed against the United States, kind of bullying and power. This fits like, as we say in Venezuela, an illo ledo, like a ring in the finger. It's like a perfectly matching reality to a long standing narrative. We've long cried about the wolf, and the wolf is finally here.
- [43:20]
PJ Vogt
And so people are starving. Crime is up. The misery part of the equation works, but it doesn't lead to political change. Is this the point though, where you just see like massive amounts of migration, not just among upper and middle classes, but everybody?
- [43:35]
Alejandro Velasco
Yes. And you start to see it in ways that, You know, as, as a Venice one, I think I would say are previously unthinkable.
- [43:47]
PJ Vogt
Meaning what?
- [43:52]
Alejandro Velasco
Whole families walking hundreds, thousands of miles across Venezuela and then later extremely treacherous terrain, in some ways not knowing where they're going, just knowing that they can't stay. Those images around 2017, 18 especially, were really difficult to watch.
- [44:21]
PJ Vogt
You can Understand how bad things got by looking at migration rates, by looking at crime or gdp, or you can just look at what's left of what had been for years the country's economic engine. Petavasa, the state oil company. William Newman, the journalist recounts in his book a 2018 race reporting trip where he saw the shambles Pedesa was in. Maduro at this point had appointed a loyalist general with no oil experience to run Pedhe, head of the company's finances. Maduro's wife's nephew Newman goes to visit some of the facilities. This is what he writes. Quote, Peda wasn't an oil company anymore. It was a junkyard. Thousands of employees had stopped going to work or fled the country because the wages pedavasa paid had become worthless. All the installations I visited were in ruins. Thieves stole the motors from pump jacks and tore transformers off poles to remove the copper inside. Workers had no tools, vehicles were broken down. The company had stopped giving workers the meals required by their contracts. At one storage facility, a leaking tank spewed a lake of black crude and quite quote, which brings us almost to today, the country in deep poverty from mismanagement, from a drop in oil prices, from US sanctions and Maduro locked in the cycle that Alejandro just described. Brutal repression, the fear of consequences. And so more brutal repression.
- [45:57]
Alejandro Velasco
You have an increased presence of police and state repressive apparatuses which are very powerfully, in 2017, 2018, going to be used by the Maduro government to mask an operation against crime. But in fact it's going to be used to exact political control over popular sectors. So there's an operation called the FIAs which are essentially meant to deploy much in the same way, I should say, and I'm happy to be taken to task by this firm. Anyone wants, much like we're seeing ice right now, just militarized police forces going into popular sector communities with seemingly total impunity. And there the numbers of extrajudicial killings that we know of are extremely high. They're up in the, you know, tens of thousands of Venezuelans killed over several years time.
- [46:51]
PJ Vogt
And are they killing, is it like they're killing protesters? They're just killing people like they just want, they're like everyone's scared and desperate and the only way we're gonna keep social control is if their fear of being murdered exceeds their fear of stepping out of line.
- [47:07]
Alejandro Velasco
Yes, exactly. It's, you know, the, the justifications are not just, you know, hard to come by. It's that they're not even provided as A premise, the broad justification is to tampon crime.
- [47:21]
PJ Vogt
And the dynamic you previously described, which is like, the more repression, the more Medora has to stay in power because he understands that if he loses power, he could end up in jail. It just perpetuates itself over and over.
- [47:35]
Alejandro Velasco
And also becomes manifest because now the repression has reached a level that is in the sights of the International Criminal Court, which opens an investigation into crimes against humanity. Right. And so again, this ratcheting up of repression in order to stay in power now has reached the levels where, you know, an international body, just the United States, but an international body is taking notice and saying, this far exceeds anything that could plausibly be called law enforcement.
- [48:08]
PJ Vogt
So by like 2017, 2018, 2019, it sounds like the vision you're describing of life in the country is pretty close to hell. It's just like poverty, repression, fear, people walking out if they can walk out. Like, as bad as it's ever been.
- [48:25]
Alejandro Velasco
As bad as it's ever been. The level of economic collapse and of migration that Venezuela experiences during this time is greater than at any other point in Latin American history. And it's comparable globally only to countries that have experienced civil war. It is unprecedented, not just for Venezuela, but the region and the world. The other strange dynamic of this moment is that, of course, the government has a perverse incentive for people to leave.
- [48:59]
PJ Vogt
Why?
- [49:00]
Alejandro Velasco
You have fewer mouths to feed and fewer potential protesters to repress.
- [49:05]
PJ Vogt
Right. The people who are unhappy go, and you're left with. Right, yeah.
- [49:12]
Alejandro Velasco
And so this isn't like, say, a communist regimes in the 20th century at the tail end of the Soviet Union trying to force people to stay. There's a strong incentive for the government to allow folks to leave for the reasons that I mentioned. But then there's the other reason, which is people abroad can send money back in the form of remittances. And so it creates this kind of. And this is what we find beginning around 2020, 2021, where there is as low and as catastrophic as the economic collapse was in those deep years of darkness, there is a sense of economic recovery, not because things are vastly improved, but because they're minimally improved.
- [50:00]
PJ Vogt
There's a term in Wall Street, a dead cat bounce. A thing that is sufficiently crashed will rise up a tiny bit from the bottom.
- [50:11]
Alejandro Velasco
And that is what was experienced.
- [50:18]
PJ Vogt
Of course, this grim, status quo life in Venezuela getting marginally more livable as the most desperate people flee for a better life elsewhere. There was one politician who did not appreciate that equilibrium. Which brings us to our Last chapter after one more short break, Donald Trump.
- [50:57]
Alejandro Velasco
New Year.
- [50:58]
PJ Vogt
Same extra value meals at McDonald's. So now get two snack wraps plus fries and a medium soft drink for just $8 for a limited time only.
- [51:07]
Alejandro Velasco
Prices and participation may vary.
- [51:09]
PJ Vogt
Prices may be in Hawaii, Alaska and California.
- [51:11]
Alejandro Velasco
And for delivery.
- [51:21]
PJ Vogt
Welcome back to the show. Chapter five, Donald trump. Today, the Supreme Court allowed for now the Trump administration to strip legal protections for nearly 350,000 Venezuelans currently living in the US under a program that had protected them from deportation. The court's decision. After talking to Alejandro, I found myself reflecting on the past year of headlines I'd seen without ever really absorbing the stories about Trump's increased obsession with Venezuelan migrants, stories about Trump deporting as many Venezuelans as possible from the United States.
- [51:55]
Alejandro Velasco
Andre Hernandez Romero was among the 238 Venezuelans deported without court hearings under the Alien Enemy Enemies act to an infamous megaprison in El Salvador.
- [52:04]
PJ Vogt
I remembered also the Trump administration's at the time, very confusing strategy of suddenly launching drone strikes on Venezuelan boats that they alleged were smuggling cocaine.
- [52:14]
Alejandro Velasco
President Trump says American forces destroyed what he described as a Venezuelan drug boat headed for the United States. The US Military has attacked a second boat in the waters off Venezuela. He said yesterday that 11 people on board were killed.
- [52:29]
PJ Vogt
And finally, the most recent news, US.
- [52:32]
Alejandro Velasco
President Donald Trump launched his most aggressive foreign military action yet, attacking Venezuela, capturing its president, Nicolas Maduro, on Saturday and promising to put the South American country under temporary U.S. control. So we are going to run the country until such time as we can.
- [52:51]
PJ Vogt
Do a safe property and judicious transition. They could Donald Trump putting himself in charge of the resource that had already caused so much damage here in Venezuela.
- [53:02]
Alejandro Velasco
We're going to have our very large United States oil companies, the biggest anywhere.
- [53:08]
PJ Vogt
In the world, go in, spend billions.
- [53:11]
Alejandro Velasco
Of dollars, fix the badly broken infrastructure, the oil infrastructure, and start making money for the country.
- [53:20]
PJ Vogt
Listening to Trump explain how easy it was going to be to control Venezuela's oil, to build his own magical vision of the future, I wondered how much of the history he knew. I wondered if he knew any. It's not a particularly deep or insightful thought, but the thing that struck me, hearing that history really was just its pace. Venezuela, a country that decade to decade could completely shift from prosperous democracy to authoritarianism to wherever it was we were. Now, my country, the United States, is currently embroiled in its own confusing spasms of history. Quite different. But these days, I can't hear a story of another place without looking for some vision of US in its reflection. So I found myself, despite myself, asking Alejandro to compare the pace of change here to the pace of change there. It's just like a crazy sweep of change. I mean, Americans right now feel like our country has suddenly, violently changed. But relative to Venezuela, it's like not.
- [54:29]
Alejandro Velasco
Oh, no, no. I mean, I think the fear, and I would submit the legitimate rifle fear, is that many of the warning signs are present, but weirdly enveloped under a very different rubric and discourse. It's not socialism, it's not anti imperialism. It's the opposite. It's like hyper capitalism, crony capitalism and a new form of imperialism. But the mechanics are similar. It's the militarization of policing. It is the patrimonialization of the state, such that the only thing that matters is what you can extract from the state and whether you have access to it. And so the kind of nakedness of that project, I think, I suspect as an historian, is occasioning a sense of shock such that, can it really be this crass? And that sense of crassness then creates a little bit of a delay in terms of response. I experienced this since the attack on Venezuela, where so many of the quiet parts were being said out loud that as an historian of Latin America who is trained to read subtext, who is trained to read between the lines, who is trained to read behind the blacked out parts of declassified CIA documents, suddenly I'm being told all of that. And my first instinct says, well, maybe there's something else behind this rather than the thing itself.
- [56:08]
PJ Vogt
It can't just be the American President saying, we're going to the country to take the oil.
- [56:12]
Alejandro Velasco
It can't just be that. Or it can't just be Stephen Miller saying, no, no, no, the continent is ours. How dare they sell their natural resources to China? Or it can't just be Marco Rubio saying, the left is over in Latin America for centuries to come, or it can't just be Pete Hegseth saying, you're next, whoever next might happen to be like. It all feels so contrary to instinct that the reaction, at least on my part, and I think more generally we might be sensing this is somewhat of a delay.
- [56:48]
PJ Vogt
People are shocked because they can't believe what they're seeing, and so they react more slowly.
- [56:51]
Alejandro Velasco
That's my sense. Yeah.
- [56:53]
PJ Vogt
I mean, I find it. But that is how I have felt. And it has just made me want to understand the story of Venezuela better. At least I think I did not.
- [57:06]
Alejandro Velasco
Feel.
- [57:08]
PJ Vogt
I was not a buyer for the grand promise of the Trump Administration, getting involved, understanding the history of Venezuela, I think I feel more pessimistic than I was and I was pessimistic before. It just feels like, you know, there's this temptation, I think in America, for understandable reasons, when I talk to my fellow relatively uninformed friends about the country, it's like we channel. The arguments end up being were the problems problems of socialism, were the problems problems of imperialism? When you really hear the story, sure, I think you could make arguments for both. But like, it more sounds like a resource curse. It sounds like while wealth can be helpful, immense sudden growth of anything really risks being destructive. But if you understand it as a country where the rise and fall of the price of oil has encouraged very, very short term leadership, having Trump, who engages in that kind of leadership anyway, take control and explicitly not on a project of democracy building or like without even the pretense of anything. But we would like to further ravage this not even for short term Venezuelan gain, but for American gain. It really sounds dire.
- [58:30]
Alejandro Velasco
Yeah, it is absolutely dire. And I mean, there are many surprising turns in Venezuela since the attack on Saturday the 3rd, but certainly one of the most surprising is that the entire regime has remained in place.
- [58:47]
PJ Vogt
Right. He arrested Maduro and his wife or whatever. He went to the country with helicopters and took them, but it wasn't. Everyone around them is in charge. It's not like we're putting in a pro democracy person or a member of the opposition. They're just like leaving the exact structure intact, but putting the US at the top of it.
- [59:09]
Alejandro Velasco
Yes, and also with the complete support, it seems like, of the United States. So at least again, in the public pronouncements of Trump and others and his administration, the direct and loud sidelining of the opposition in favor of the remaining regime, which is again, exactly the same as it was before, is certainly a type of regime change that I've never seen or read about. And so we, I think, are at the cusp of reference that don't quite make sense on the surface, but that are laying bare a much scarier reality about the near and distant future for us in Venezuela and in the United States and the world. I do think that what I would most hope for, especially in this moment, for people in the United States to think about when it comes to Venezuela, is to resist the easy narrative of it's this or that, this person is a hero, that person is a devil. And that explains everything. Everything. Leaning into complexity when it comes to Venezuela, I think is the first step towards understanding it. Even if actual understanding it may not come about very easily.
- [60:40]
PJ Vogt
This sounds like a good mission. It sounds like not where our country is most easily resting right now, but it sounds like the right approach. Thank you for explaining this immensely complex country.
- [60:54]
Alejandro Velasco
Thank you.
- [60:59]
PJ Vogt
Alejandro Velasco. He's an associate professor of history at New York University. We've included a link to a great piece of analysis he's written on Chavismo in our show notes. Go check it out separately. I also recommend William Newman's book, which I've referenced a few times in the story Things are Never so Bad that They Can't Get Worse, a title I can now not use for my memoir. God damn it. Search Engine is a presentation of Odyssey. It was created by me, PJ Vogt and Shruti Pinamaneni. Garrett Graham is our senior producer. Emily Maltaire is our associate producer. Special thanks this week to Miguel Santiago. Colon Theme, original composition and mixing by Armin Bazarian. This episode was fact checked by Piper Dumont. Our executive producer is Leah Rees Dennis. Thanks to the rest of the team at Odyssey, Rob Morandi, Craig Cox, Eric Donnelly, Colin Gaynor, Mora Curran, Josefina Francis, Kirk Courtney and Hilary Scheff. If you'd like to support our show, get ad free episodes, zero reruns and bonus episodes. Please consider signing up for Incognito mode at Search Engine Show. Thanks for listening. We'll see you soon. Sa.