The CGD Podcast: Can Venezuela's Economy Recover?

Guests: Dany Bahar & Liliana Rojas-Suarez

Date: January 21, 2026
Host: David Evans

Episode Overview

This episode delves into one of the most pressing questions in international development: Can Venezuela, facing the deepest economic crisis in Latin American history, recover? With President Nicolás Maduro recently removed from power, the country stands at a pivotal juncture. Expert guests Dany Bahar, Director of CGD's Migration and Displacement Program (and native Venezuelan), and Liliana Rojas-Suarez, Director of CGD’s Latin America Initiative, provide insights into how Venezuela unraveled, examine the prospects for recovery, and outline the necessary conditions and policies for economic stabilization and future prosperity.

Key Discussion Points & Insights

The Collapse of Venezuela's Economy: A Personal & Historical Account

[02:18-05:34] Dany Bahar

• Venezuela transformed from a regional beacon of wealth, democracy, and diversity into one of the world’s most acute humanitarian and economic disasters.
• Once a magnet for immigrants (including Bahar’s own Holocaust-survivor grandparents), Venezuela prospered throughout the oil booms of the 1970s and early Chávez years.
• Key turning points:
  • Hugo Chávez’s rise in 1999: Marked the slow erosion of democratic institutions as executive power became centralized and the constitution was reformed.
  • Economic conditions initially improved thanks to a historic oil boom, reducing poverty and inequality for a while.
  • Post-2014 oil price collapse: The near-total dependence on oil revenue, combined with an overregulated and atrophied private sector, caused a catastrophic 70-80% GDP decline without war (a "man-made crisis").
  • The exodus: Created the world’s largest current refugee crisis.

Memorable Quote:

"From being a wealthy country and a magnet of immigrants, Venezuela became a very poor country, one of the poorest in the region and the source of the largest refugee crisis in the world as of today. So how does this happen in twenty, thirty years?"
— Dany Bahar [03:03]

Comparisons: Does Latin America Offer Precedents for Recovery?

[06:01-08:41] Liliana Rojas-Suarez

• Venezuela’s crisis is the region’s worst ever, both for severity and duration. Still, past crises elsewhere (e.g. 1980s hyperinflation and recessions in Peru, Brazil, Bolivia, Chile, Mexico) offer lessons.
  • Peru: GDP collapsed 25%, poverty spiked over 60% in the '80s before Peru's 1990 stabilization program restored growth—a less severe but comparable trajectory.
  • Core takeaway: Even in hyper-crises, comprehensive programs can restore growth (despite pitfalls in policy sequencing or social protection).
• Success depends on avoiding the errors of the past and forging credible reform plans.

Memorable Quote:

“No other crisis in the region has been as prolonged and structurally deep... however, there are multiple examples, especially in Latin America, where disaster was met with comprehensive economic programs to stabilize economies and spur growth.”
— Liliana Rojas-Suarez [06:14]

The Foundation for Recovery: What Needs To Be in Place?

[09:21-11:56] Liliana Rojas-Suarez

• Investment is critical for any economic revival, but Venezuela’s public sector deficits make private and foreign investment essential.
• Private investment depends on credible institutions, especially guarantees for property rights and contracts.
  • Four key pillars:
    1. Independent electoral council
    2. Independent legislative power
    3. Independent judiciary
    4. Independent central bank
• These don’t need to be perfect, but their basic operation is essential to attract funds and begin stabilization.

Memorable Quote:

“Funds are not going to flow to Venezuela unless it has assurances of the rule of law.”
— Liliana Rojas-Suarez [09:38]

First Steps of a Recovery Program: Data, Debt, and the IMF

[12:20-15:27] Liliana Rojas-Suarez

• Two ingredients are essential: data (for understanding gaps) and money (to fill those gaps).
• Venezuela lacks official data and must re-engage the IMF/World Bank, beginning with an Article IV mission and restoration of credible statistics.
• Likely fiscal adjustments:
  • Fiscal consolidation and oil sector reform
  • Debt restructuring
  • Exchange rate unification
  • Lifting price controls
  • Social protection programs for the vulnerable
• The need for IMF resources is both financial and symbolic (signals willingness for deep reform).
• Oil alone will not suffice for stabilization: foreign funding will be necessary, and IMF Special Drawing Rights (SDRs) could play a pivotal role once diplomatic barriers are removed.

The Role and Limits of Oil: Hopes and Realities

[15:56-19:11] Dany Bahar

• Venezuela owns the largest proven oil reserves globally, but “oil below ground is worth zero dollars.”
• Production capability has collapsed due to chronic mismanagement, corruption, talent exodus, and under-investment, dropping from ~3.5 million barrels/day at peak to ~1 million today.
• Modest near-term production increases are possible, but restoring previous levels requires massive new investment—which in turn depends on political/institutional change.
• Even a strong oil rebound can’t alone fulfill Venezuela’s future fiscal and debt requirements.

Memorable Quote:

“Oil below ground costs $0. Nobody wants to buy the oil below ground. People want to buy the oil that has already been out to pump your tanks, et cetera…”
— Dany Bahar [15:58]

The Debt Catastrophe: Scale and Pathways Out

[19:34-24:00] Dany Bahar & Liliana Rojas-Suarez

• Venezuela’s debt (including state oil company PDVSA’s liabilities) is estimated at $150 billion—about triple its estimated $50 billion GDP. Data is patchy and opaque.
• The origins: “The crisis is man-made”—public overspending and borrowing in the oil boom, no countercyclical saving, and then money printing, against all economic orthodoxy.

Notable Analogy:

“Joseph... was the first macroeconomist in the world: in the good years, save some of that grain so during the famine you can eat. In Venezuela, they spent in the good years, borrowed more, then printed money. That’s how we got here.”
— Dany Bahar [21:36]

• Rojas-Suarez: Venezuela’s is a “solvency problem, not a liquidity problem,” demanding principal haircuts—meaning creditors must accept permanent losses.

[24:07-27:22] Liliana Rojas-Suarez

• The restructuring will be extremely complex. Besides bondholders, claims include unresolved oil-for-loan deals with China, arbitration awards, and sanctions.
• The IMF could play a unique role through its “lending into official arrears” policy, extending loans even if all creditors aren’t on board, leveraging such finance to pressure holdouts (e.g. China) to participate.

Memorable Quote:

“Venezuela cannot repay this debt and that warrants large principal haircuts in the negotiation with its creditors. Without those haircuts, it would be extremely hard to regain debt sustainability and growth will not restart.”
— Liliana Rojas-Suarez [23:23]

The Single Most Important Policy?

[27:50-29:46]

• Dany Bahar: “Free and fair elections... We are now in a situation in which the economics will have to wait for the political solution. The regime that was in charge of the collapse is still in charge… We need free and fair elections.”
• Liliana Rojas-Suarez: Agrees, but adds: “The reincorporation of Venezuela to the IMF. The country needs the resources and advice of the institution to put in place the policies and reform that has been needed for a very long time.”

Notable Quotes & Memorable Moments

• "So from being a wealthy country and a magnet of immigrants, Venezuela became a very poor country... and the source of the largest refugee crisis in the world as of today." — Dany Bahar [03:03]
• "Funds are not going to flow to Venezuela unless it has assurances of the rule of law." — Liliana Rojas-Suarez [09:38]
• "Oil below ground costs $0. Nobody wants to buy the oil below ground... So how do you get that oil out?" — Dany Bahar [15:58]
• "Venezuela’s debt... is north of $150 billion to repay... it’s an extraordinary debt—definitely a binding constraint for future recoveries." — Dany Bahar [19:54]
• "Venezuela cannot repay this debt and that warrants large principal haircuts in the negotiation with its creditors." — Liliana Rojas-Suarez [23:23]
• "Free and fair elections? That would be my only answer... we need a government that represents the will of the people." — Dany Bahar [27:50]

Timestamps for Key Sections

• Venezuela’s economic collapse explained (Dany Bahar): [02:18–05:34]
• Comparison with other Latin American crises (Liliana Rojas-Suarez): [06:01–08:41]
• Necessary institutional reforms for recovery: [09:21–11:56]
• First steps for stabilization, IMF’s role: [12:20–15:27]
• Can oil lead the rebound? (Dany Bahar): [15:56–19:11]
• Size, origins, and implications of Venezuela’s debt: [19:34–24:00]
• Complexities and strategy for debt restructuring: [24:07–27:22]
• Single most vital step for recovery (magic wand question): [27:50–29:46]

Tone & Final Reflections

The conversation balances realism and gravitas with a thread of cautious optimism, stressing that Venezuela's fiscal catastrophe is "man-made" and avoidable with better institutions and prudent policy. Yet, both guests agree that political transformation (free and fair elections) and institutional restoration—backed by international support, particularly the IMF—are non-negotiable prerequisites for any meaningful recovery.

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