Bloomberg’s Bill Faries writes about the continuing economic plunge of Venezuela, as it is being shown up by better-managed Bolivia.
Back in the late 1970s, when Venezuela’s oil wealth fueled the supersonic Concorde’s flights from Paris to Caracas, the idea that a poverty-stricken, landlocked nation known for bowler hats and coca leaves would someday surpass it was unthinkable. How times have changed.
Bolivia, South America’s poorest country on a per-capita GDP basis, leads or is poised to surpass Venezuela in a number of areas. Already plagued with a plunging currency and the world’s fastest inflation rate, Venezuela’s decline is stunning for a country that holds the world’s largest reserves of oil and whose late president, Hugo Chavez, once served as a mentor for Bolivia’s leader, Evo Morales.
While Morales took over Bolivia’s natural gas industry in 2006, his policies were never as radical as Chavez, who once walked through Caracas’s downtown, pointing at various companies and saying “nationalize it.” Morales and Finance Minister Luis Arce “understood the importance of having orderly fiscal policy,” said Ben Ramsey, chief economist and head of sovereign debt strategy for the Andean region at JPMorgan Chase & Co. in New York, who follows the two countries. “They have massive reserves vis-à-vis their economy.”
After peaking at more than $40 billion in 2008, Venezuela’s reserves have tumbled to less than $15 billion, much of that in gold. While falling energy prices have also affected Bolivia, its reserves have been on an upward or stable trajectory under Morales, peaking at about $15 billion last year from less than $5 billion when Morales took office in 2006.