The economic consequences of the boycott against Venezuela

Which is the effect of the boycott directed from the USA to Venezuela since 2013, and with greater emphasis since 2015, when the US cut off access to the credit market?

The Achilles heel of Latin America continues to be its external sector. The United States (USA) is aware of this fragility and uses it to its advantage, as ​with​ Cuba, which has sustained a US-imposed embargo on its external sector for 6 decades. All the developing countries described today as «economic miracles» of recent development, ​have accomplished this status because they managed to reduce dependence on the external sector.​ Development strategy based on exports is not only an active policy of economic development, it is also a strategic policy of sovereign​​ty.

The history of Latin America has shown that economic crises begin and end with imbalances with ​foreign countries​, either due to a fall in the international prices of raw materials, a massive flight of foreign currency or a mismatch in the financing of the external debt. Any of these situations ultimately sparks a crisis of foreign exchange financing and an adjustment of the domestic economy via the exchange rate.

Venezuela’s case is even more critical because the domestic supply of goods is highly dependent on the amount of foreign currency available for imports. Venezuela is a country that since the 1960’s has deepened its productive specialization in oil and, consequently, is highly dependent on imports. The dollar is the most important input of the aggregate supply and the country’s productive system depends on financing from abroad to continue reproducing. Without a net inflow of dollars to finance the productive process, the economy shrinks to the rhythm of the scarcity of foreign currency. The economic boycott impacting Venezuela has intensified since the inauguration of Nicolás Maduro in 2013 and is a sign that full trade integration in globalization has negative side effects,  among which are the geopolitical risks that affect the country today.

In this brief note, we have made a counterfactual estimate of the effect of the boycott directed from the USA to Venezuela since 2013, and with greater emphasis since 2015, when the United States cut off access to the credit market, repeating the Cuban recipe of commercial and financial asphyxia. Using a macroeconomic model of consistency, we quantify the effect of the financial blockade on the production of the country and, in part, on the conditions of the labor market and migration.

The work shows that the blockade explains much of the economic crisis, which has been the main cause of migration, and argues that the international attitude, which is to attribute the total blame to the Government of Venezuela is equivalent to the excuse of a rapist blaming the length of the victim´s skirt.

​Reasons for the Economic Blockade ​

What is the motivation behind the international boycott led by the U.S.A. against Venezuela?

First of all, we have to ask ourselves if the intervention is really justified for humanitarian reasons. In our understanding, this argument collapses when we observe that the United States has had a very hostile and coup-oriented policy towards the Venezuelan government since the beginning of Chavez’s administration, when there was no humanitarian crisis. It also collapses when we prove that the humanitarian crisis is the direct consequence of the boycott that the USA has promoted, through the instrument of economic war based on financial hegemony.

There are many explanations for US claims about Venezuela. Many of them are of a political nature and have to do with challenges to US hegemony so present in Chavist thought, and a commitment to a multipolar world in defiance of the Monroe Doctrine, with open participation of foreign actors like China and Russia. No less important are the economic reasons. These include the unprecedented challenges led by Venezuela to the hegemony of the dollar and the abundance of Venezuelan natural resources.

In Economics we use the concept of the «resource curse», which we can describe as the negative effect on development generated by the abundance of natural resources. One of the strains of this curse is explained by the fact that the dispute over control of the resource leads to political conflicts that hinder development. Some of those conflicts are internal[i], between factions that try to control the resource; others rely on internal factions that represent external interests, as is the case with the economic boycott of Venezuela.

Venezuelan Challenge to the Hegemony of the Dollar

After the oil crisis of the 1970s, the United States reacted by unilaterally ending the Bretton Woods agreements, a global monetary system based on the gold standard. One of the triggers of the crisis was the oil embargo by Saudi Arabia and other Arab countries against the countries that supported Israel in the Yom Kippur war, including the US. The United States reacted to prevent any other country from using oil as a weapon against the US economy.

The agreement reached with the Saudis included the protection of Riyadh by Washington against any external threat, in exchange for all oil sales being quoted and paid for exclusively in US dollars. In this way, the United States guaranteed the artificial demand for dollars in international economic transactions, so that it became the new pillar on which to base the global power of the US economy. This agreement formed the strategy to contain the damage to US dollar credibility after the devaluation produced by ending US commitment to the gold standard. The new monetary standard would no longer bind the holdings of dollars to gold reserves, but instead would link it to oil, so that any country that needed to buy or sell oil had to obtain the dollars to make the transaction. This created the world demand for dollars that would sustain its value and credibility as the new reserve and global circulation currency.

Any country that has challenged the hegemony of the dollar quickly received the American response, either via embargoes or -if these were not effective- some kind of military intervention. Iraq and Libya, two countries with large oil reserves, suffered US interventions after they pushed for the creation of alternative systems of oil trade that avoided the US dollar as transaction currency. They are not the only examples. Sanctions on the Russian economy also intensified after its attempts to create alternative mechanisms for exporting the Russian oil and gas supply.

Similarly, while initiating the sovereign recovery of its natural resources over the last two decades, Venezuela has promoted initiatives to cure itself of dependence on the dollar.

In this sense, initiatives such as the SUCRE (Unitary System of Regional Payment Compensation), bilateral agreements with other countries to trade with other currencies, attempts to create a regional financing bank such as the Bank of the South or, more recently, the creation of the crypto currency the Petro, pose challenges to dollar hegemony driven directly by Venezuela.

SUCRE[ii], an initiative that was created within the framework of the ALBA (Bolivarian Alternative for Latin America and the Caribbean), proposed the creation of an international payment system based on a virtual currency that functions as a common account unit for the registration of international operations. These operations, and the resulting settlements, are channeled through the Central Banks of the participating countries that offset the accounts by virtue of the operations carried out.

Venezuela has also promoted bilateral agreements in recent years to trade oil in currencies other than the dollar. The agreement with China to sell oil in yuan stands out. China, currently the second largest oil consumer in the world and the main opponent of US hegemony, issued the first yuan oil contract in March 2018, an important step to convert the renminbi into a world reference currency. In addition to Venezuela, other oil exporting countries with agreements to trade oil in yuan are Nigeria, Angola, Russia and Iran; these last two countries are also victims of the sanctions and boycotts imposed by USA.

The most recent initiative launched from Venezuela to counteract the hegemony of the dollar was the launch of the Petro, a non-speculative cryptocurrency, whose value derives from the country’s natural resources. The purpose of the Petro is to overcome the financial blockade, raise funds with the issuing of the currency and create an international reserve asset to compete with the demand for dollars within Venezuela[iii].

Despite the attempts of other currencies such as the Euro, the Renminbi or the initiatives promoted by Venezuela, the dollar still represents 62% of global debt, 56% of international loans, almost 44% of transactions in the exchange markets and almost 63% of foreign reserves.

The common denominator of these initiatives supported and/or promoted by Venezuela is the primary objective of freeing the country of financial dependence, and the secondary one of diminishing the firepower of one of the most powerful strategic weapons used indiscriminately by the United States: the hegemony of the dollar. Venezuela shares the objective of financial sovereignty with many nations. The more the US uses the financial boycott, the more it encourages these countries to take measures to achieve financial independence.

It is difficult to predict if Venezuela and others will succeed in overcoming US dollar hegemony, as we are currently in a transitional stage towards a multipolar world, and the United States, led by Donald Trump, has abandoned the diplomatic channel, intensifying the battle against all those who dare to challenge its two primary modes of power. The trade war against China, the sanctions against Russia, and the trade blockade, financial boycott, political interference and threat of military intervention against Venezuela are responses indicative of a US power in decadence, while a multipolar world begins to form.

The United States is aware of the strategic nature of the hegemony of the dollar, and as it is demonstrating with its actions against Venezuela and other countries that have challenged the monetary system of petrodollars -such as Iraq and Libya- it is willing to make great sacrifices of diplomatic reputation to defend its position in the global order. The mood of political impropriety that today abounds in American leadership should not surprise anyone: it is a sign that the moment of truth has arrived, and a reminder that changes in global hegemony have never been peaceful.

Exuberance of Venezuelan Natural Resources

However, it is difficult to show that behind the coup attempt there is a material interest in the abundance of Venezuelan natural resources. How to prove that ​USA wants to control natural resources to have an international competitive advantage and / or stimulate its economy and / or benefit its corporations?

Perhaps the circumstantial statements of some unsuspecting official give the basis for such a suspicion. Consider the statements of the US Security Adviser John Bolton[iv], who affirmed without blushing that «it would be a big economic difference for USA if we get American oil companies to participate in Venezuela’s oil investment and production» or Trump’s own statements regarding the invasion of Libya, in which he acknowledged that US should have extorted the rebels against Gaddafi by offering them a lapidary: «we will help them but we want 50% of their oil»[v]. Again, the humanitarian aid of USA to the Arab Springs seems to have had the same motivations as the humanitarian aid to Venezuela. Considering that Venezuela has twice as much oil reserves as Libya, it is easy to imagine that Trump’s coup will be even more intense.

Although we cannot definitively demonstrate or document the reasons for the coup d’état promoted by the United States, it is useful to approximate how the countries participating might benefit and what competitive advantages they will gain from the coup attempt. After all, the theory of crime shows us that the best way to find the perpetrator is to look for those who would benefit from the crime.

In this regard, Venezuelan oil reserves stand out, representing 18% of total global reserves. In effect, the world reserves stand at 1.65 trillion barrels, of which Venezuela has 300.9[vi] billion barrels, making it the nation with the world’s largest oil reserves.

The world’s daily oil consumption amounts to 98 million barrels per day, and the United States consumes 19.2%[vii] of this total. If we consider this level of consumption, the Venezuelan oil reserves account for 9.2 years of the 50[viii] years that the total world reserve would last. In this sense, considering the consumption of the United States (which has scarce oil reserves), that fracking wells are producing less and for shorter time-spans than expected, and that US imports 53%[ix] of the barrels it consumes, it is easy to understand the importance for the United States of access to a large source of oil such as Venezuela.[x]

Worlwide Oil Reservation

In addition to the relevance of the oil resource itself, the proximity between the United States and Venezuela is of utmost importance. The distance between both countries is determinant of the final price at which the United States can access oil. It is significantly cheaper to transport oil 1,500 mi from Venezuela to the United States than to transport it from Saudi Arabia, which is 7,750 mi away. The benefits are multiplied when taking into account that several Venezuelan oil refineries are located in the United States.

Up to this point, the interest of the United States in Venezuelan oil is clear, but the question is, if it already has access to it through exports, what is the US seeking with its intervention in Venezuelan politics? The answer is linked to how the Government of Venezuela exercises the power that oil gives it in geopolitical terms. The Caribbean country is influential in determining world oil prices via OPEC and has the possibility to divert oil production to other countries such as China (1st importer and 2nd world consumer), achieving greater independence from exports to the US.

Venezuela is not only rich in oil. It is a country of vast natural resources. Its natural gas reserve reaches 5.7 trillion cubic meters, giving it the 8th largest gas reserves in the world by nation. This reserve, added to that of USA, represents approximately 7.4% of the world natural gas reserves, potentially giving the US greater weight in a market strongly concentrated in the hands of Russia, Iran and Qatar (54%[xi] of the reserves, collectively), all countries affected by US-directed economic hostilities.

Global Gas Reserves

In the mining arc of the Orinoco, in particular, gold reserve estimates reach 8,900 tons[xii], an amount that would place Venezuela as the 2nd country with the largest reserves of this precious metal[xiii]. United States access to these reserves would allow the country to triple its current reserves.

Main Gold Reserves

Venezuela’s estimated iron reserves reach 14.6 billion tons[xiv], making it the 5th country with the most reserves. The US has a moderate level of vulnerability in iron markets, given that it imports up to 49% of what it consumes[xv]. Control of this Venezuelan resource would quintuple US access to iron, practically eliminating this dependence.

Main Iron Reserves

Bauxite, the raw material of aluminum, is another of Venezuela’s resources. Despite having 1%[xvi] of the world reserve, Venezuela has 16 times more bauxite than the United States, which depends 100% on imports to supply its consumption[xvii].

The Case of the Economic Blockade on Venezuela

The US has frequently used the economic boycott as a strategy to intimidate those who defy its hegemonic guidelines, — often as a prelude to military interventions — with devastating economic, social and political consequences for countries on the receiving end.

Throughout history, there have been frequent documented episodes of economic blockades orchestrated or supported by the United States. Standouts include that suffered by Argentina during Juan D. Perón’s first Presidency[xviii], the one in Cuba in effect since 1960, in Chile during Salvador Allende’s presidency in 1973 and the one perpetrated against Joao Goulart’s[xix] Brasil in 1964. So far during the 21st century a total of 18 countries have suffered sanctions and blockades by the United States. The list includes Cuba (suffering the consequences of the blockade for more than 60 years), Iran, Iraq, Burma, Zimbabwe, Belarus, Syria, Democratic Republic of the Congo, South Sudan, Russia and Venezuela, among others. We can add cases like Qatar, sanctioned by Arab countries within the United States’ sphere of influence.

If, during the 20th century, the justification for the blockades was explicitly the anti-communist struggle, nowadays it is disguised by other rhetoric, such as the fight against terrorism, human rights violations or humanitarian crises, defined unilaterally. The blockade, in general terms, seeks to restrict the capacity of national income (if it is an embargo on the main source of resources of the country), shut off external sources of financing, and boycott the country’s ability to access international markets for goods and services.

In the Venezuelan case, the blockade has been based on the expulsion of Venezuela from international financial markets, preventing it from resorting to the credit market both to renew maturities and to make new loans. In a country integrated with the world as an oil supplier, productive specialization has led to high dependence on imports financed with oil revenues. Hence the financial and commercial boycott of Venezuela has much more serious consequences than in diversified economies. Venezuelan productive specialization, the result of its integration in the world economy, has backfired, in the sense of leaving it exposed to the whims of hegemonic power. In fact, there are several reasons that justify a protectionism that seeks to diversify production, not least of which is production sovereignty. Likewise, integration into global markets and the productive specialization that globalism generates in developing countries can seriously damage the sovereigntist claims of developing countries.

In Venezuela, the embargo of the US subsidiary of PDVSA (Petróleos de Venezuela Sociedad Anónima), CITGO, has sought to limit its ability to obtain financing and therefore to finance imports. Imports plummeted from yearly values of approximately 60 billion dollars between 2011 and 2013 to an estimated 12 billion in 2017. This dramatic drop in imports set the stage for a humanitarian crisis to serve the interventionist agenda of the US.

In recent years the Venezuelan economy has coexisted with various blockades and sanctions that hampered the country´s economic evolution. The adverse international situation, driven by the fall in oil prices, was aggravated by the pro-cyclical impact of the international boycott.

One of the branches of the boycott came from the rating agencies. The Country Risk indicator for Venezuela went up without correspondence to the economic risk of the real economy, and independent of changes in oil price, or the payment history and capacity of the country. It now seems evident that the evolution of the indicators anticipated with certainty the effects that the economic boycott would cause, i.e. the geopolitical risk associated with maintaining a position independent of the US. The second element of the boycott came from the sanctions of the United States, which resulted in the impossibility of accessing financing in the traditional market and of renegotiating debts, despite the fact that the payments owed were fulfilled.

In effect, between 2014 and 2017, Venezuela paid 68.653 billion dollars for payment for foreign debt. However, despite the fact that the country did not default on its payments, it was given the worst ratings by risk rating agencies such as Moody´s and Standard and Poors. Venezuela’s country risk (the rate a country pays above the risk free rate) has remained over 2,000 points since 2015, with peaks of up to 5,000 and even 6,000 recently. The reasons given by these ratings agencies when evaluating countries are opaque and tend to favor countries with free market policies while punishing the contrary. As a result Venezuelan debt, despite steady payments, was rated as having a high probability of default with a rating lower than that of countries at war, such as Syria.

This situation was deepened with the financial blockade imposed by the United States on August 24, 2017, by executive order 13808[xx] [20]. It involved:

  1. Prohibition of the Venezuelan Government acquiring new debts with maturity greater than 30 days.
  2. Prohibition of PDVSA acquiring new debt greater than 90 days.
  3. Prohibition of new acquisition of shares by the Government of Venezuela.
  4. Prohibition of payment of dividends or distribution of profits to the government of Venezuela by companies operating in the United States, which especially affects the CITGO refinery.

Between February and May of 2018, the sanctions were extended with:

  1. Prohibition of international creditors to renegotiate the debt issued prior to August 2017.
  2. Prohibition on any US citizen or financial institution from making transactions in the Petro crypto currency.
  3. Total prohibition against investing in Venezuelan assets by US citizens or on US soil.

This isolation and loss of foreign currency though the debt payments occurred in correspondence with the fall in international prices, resulting in a shortage of foreign currency. Thus, Venezuela adopted a different dynamic from most of the countries in the region, which, in the face of falling international prices, took on accelerating levels of debt. For example, during the aforementioned period, Latin American countries of comparable size, such as Argentina, Chile, Colombia and Peru, received new external debt income of $99.624 billion, $23.010 billion, $48.048 billion and $17.070 billion, respectively (IMF data). These were years in which the debt ratios increased sharply to compensate for the drop in international prices. In contrast, Venezuela lost foreign currency due to financial isolation, deepening the external problem.

In the same period lesser-known episodes have also undermined the Venezuelan economy’s ability to function normally. In 2015, a financial blockade process was initiated to increase the difficulty and expense of purchases abroad and other transactions when carried out by the Venezuelan Government and institutions.

The most notable consequences of this blockade were the delay or inability to enter vital products into the country and the extra expenses incurred by the search for payment alternatives. Vital inputs such as medicines, food and essential resources for the Agriculture Plan (Plan de Siembra) have been primary targets of the blockade.

The delays or obstacles to the entry of essential products add to the cost of operations. The ports of Venezuela are classified as Ports of War, implying a higher payment for freight and insurance for import and export. All this in a context where payment to suppliers has become increasingly complicated due to the limitations imposed by international banking when making transfers and the refusal to open accounts of the Venezuelan Government or institutions abroad (correspondent banks). Unable to pay normally through correspondent banks, the country had to arrange to make payments in alternative ways, for example, through investments funds, which involved extra expenses for commissions and fines for withdrawing the money in advance. Other times the payments could be made but with significant delays, so the funds had to be kept unpaid while proceedings were carried out to work around the imposed obstacles. Extra financial burden has also been caused by use of non-dollar currencies, given the block on dollar transactions, which implies extra conversion costs.

Below is a selected chronological list of concrete obstacles that Venezuela faced:

  1. April 2016: Financial institutions begin to stop receiving payments in dollars made by Venezuelan institutions.
  2. May 2016: Commerzbank (Germany) closes accounts of Venezuelan banks and PDVSA.
  3. July 2016: Citibank closes correspondent accounts of Venezuelan banks and institutions, including the Central Bank of Venezuela. Closing correspondent accounts reduces the ability to make payments in dollars, imposing extra costs for making transactions in other currencies.
  4. August 2016: Banco Novo Portugal prohibits transactions with Venezuelan banks and institutions.
  5. July 2017: The Delaware company, payment agent of PDVSA, refuses to receive funds from the Venezuelan oil company.
  6. July 2017: Citibank refuses to receive Venezuelan funds for the import of 300,000 doses of insulin.
  7. May 2017: Russian contractors in charge of developing the blockchain Petro using NEM code, withdraw from the contract arguing force majeure due to pressure by the US Security Exchange Commission.
  8. August 2017: Chinese banks report that they cannot carry out foreign currency operations in favor of Venezuela under pressure from the US Treasury Department, and Russia reports the impossibility of making transactions to Venezuelan banks due to the restrictions of US correspondent banks.
  9. August 2017: The correspondent bank of the Chinese bank BDC Shandong paralyzes for three weeks a transaction of 200 million dollars drawn by China.
  10. August 2017: due to pressure from OFAC, Euroclear retains 1.2 billion dollars without possibility of mobilization.
  11. October 2017: Deutsche Bank closes correspondent accounts of Chinese Citibank for processing PDVSA payments, demonstrating the pressure on international banking.
  12. October 2017: The entry of vaccines into Venezuela are delayed for four months because the US blockade makes it impossible to make payments at the Swiss Bank UBS.
  13. November 2017: Venezuela makes the payment to acquire primaquine and chloroquine (for antimalarial treatment), ordered from the BSN Medical laboratory in Colombia. The Colombian Government blocks the delivery of medicines.
  14. November 2017: Deutsche Bank, the BCV´s main correspondent, definitively closes correspondent accounts for this institution.
  15. December 2017: 29.7 million dollars destined as payment to food suppliers through the CLAP food program were returned from banks in Europe. In that same month, the Colombian authorities prevented the transfer to Venezuela of more than 1,700 tons of pork.
  16. May 2018: A payment of 9 million dollars was blocked for the acquisition of dialysis supplies.
  17. November 2018: Bank of England retains 1.2 billion dollars that the Venezuelan Government kept in that entity.

Impact Simulation of the Blockade (the Cost of the Boycott for Venezuela)

The economic statistics show the size and depth of the strangulation of external financing and the isolation of the Venezuelan capital market. The balance of payments allows us to observe two facts:

Between 2008 and 2012 the Venezuelan public sector received in net terms[xxi]  flows of more than 95 billion dollars in the form of external investments and loans, which represent foreign exchange income through the financial Account of the Balance of Payments. These net foreign exchange revenues helped finance their demand for imports and other external commitments. They represent a significant volume of financial contribution from the rest of the world, both in terms of quantity and in terms of GDP, but it is a relatively normal volume given the payment history of the country and the payment capacity derived from its export surpluses. On average, the Venezuelan public sector during this period was financed with $19 billion per year from the international market. It is a volume of income that shows an economy integrated into the international financial market and, consequently, with greater degrees of vulnerability and dependence on external financing.

Since 2013, when Nicolás Maduro took over as president, international markets closed for the country without an endogenous or exogenous economic shock, an internal crisis or collapse in the price of oil. The Venezuelan public sector not only stopped receiving foreign exchange but, on the contrary, had to pay more than 17 billion dollars between 2013 and 2017. On average, between 2013 and 2017 the Venezuelan public sector instead of receiving foreign currency had to disburse more than 3.3 billion dollars in net terms per year.

In summary, if we add the average annual value of currencies that no longer entered the country due to the blockade ($19.2 billion), plus the sum the country had to pay in average each year ($3.3 billion) we can conclude that the economy and society suffered the loss of $22.5 billion in annual revenues, as a result of a deliberate international strategy of financial isolation. Evidently, this financial pressure intensified since 2015 with the fall in the price of crude oil.

It should be noted that during this period the rest of the developing countries of the region did not suffer the same treatment from the international financial markets. In effect, it is a fact that all the countries of the region increased their indebtedness. Without exceptions, the rest of the governments of the region resorted to external financing to compensate for the fall in fiscal revenues derived from the unfavorable environment of the commodities market.

External Indebtedness


Effect of the Blockade on the Conditions of the Population.

How did this currency anemia affect the material conditions of the economy and the quality of life of the people?

Based on an exercise in macroeconomics consistency, which links the external sector (balance of payments) with the real sector (production) for the years 2011 to 2017, we can estimate the devastating consequences of the suspension of international financing both in the supply of goods and services and in the generation of jobs and migrations. The exercise allows us to isolate through simulations the effect of the financial blockade with respect to other factors that certainly also affected the economy. The statistical source used to perform the simulations is based on the information provided by the BCV. The information not available was reconstructed based on the macroeconomic consistency model.

Based on the statistical link between the balance of payments and the aggregate supply of the economy, a counterfactual scenario can be constructed that simulates what would have happened if the United States had not initiated the blockade, and the international financial flow had continued to arrive in a way similar to the period 2008-2012. For this we simulate 3 scenarios:

  1. Scenario 1: what would have happened if the 22 billion per year had been destined for imports, without altering the destiny of the same and maintaining the consumption and production patterns in force between 2008 and 2012?
  2. Scenario 2: What would have happened to the total offer, as in the previous scenario, if external financing had continued but at 15 billion annually, a figure equal to the 2008-2012 average, excluding the extraordinary financing of 2011?
  3. Scenario 3: what would have happened if the 22 billion per year had been destined to increase the production of barrels of oil, attract even more foreign currency and, therefore, compensate for the price fall during 2015 and 2016? This scenario is similar to that employed by Ecuador as a strategy to face the collapse of oil prices in 2015.

To carry out this exercise, the GDP (In current dollars) of the economy has been transformed between 2011 and 2017 to an index that takes the value of 100 for the year 2011 in such a way as to facilitate the comparison of results.

The results of the simulations are shown in graph 1, which allows comparing the real situation, the result of structural circumstances, and the boycott of the Venezuelan economy, and the situation that would have been achieved following the counterfactual exercise supposing that they had fulfilled any of the 3 proposed scenarios.

The simulations show that under any of the 3 scenarios[xxii] the economy would have had a noticeably better growth path than the current one if the blockade had not occurred. In fact, in 2013 and 2015 the economy would have achieved a growth of GDP with respect to the previous year. Even under scenario 3, the economy in 2017 would have seen signs of recovery if the flow of foreign currency through the external debt had entered in similar conditions as those that occurred during 2008-2012.

By comparing the scenarios with reality, we can draw some important conclusions: Between 2013 and 2014 production would have been, on average of all the scenarios, almost 20% higher than it was. This implies that there would have been virtually no fall in GDP in these two years.

Between 2015 and 2017, when the blockade intensified, production on average would have been 49% greater than it was. Of every 10 dollars of goods and services that the economy had the capacity to produce, the blockade between 2015 and 2017 took $5 from the population.

Our estimates determined that, in 5 years of financial blockade, Venezuela cumulatively lost 1.6 GDP according to the first scenario, 1.3 GDP under scenario 2 and 1.1 GDP in scenario 3. In conclusion, the conditions imposed were so extreme between 2013 and 2017 that Venezuela lost in production and living conditions the equivalent of one and a half years of production (GDP) of its economy purely as a result of the blockade. In practice, the country lived for 5 years with only three and a half years of production according to scenario 1.

These results allow us to isolate the percentage of the crisis caused exclusively by the financial and commercial boycott. In effect, we can compare the fall in terms of observed production by the end of 2017 with the fall that would have been reached under each scenario. The difference is the portion of the crisis attributed to the effect of the boycott. According to scenario 1, the boycott explains approximately 60 % of the crisis, while under the second scenario it explains 43%, and under the last scenario, 30%. The remaining percentage can be attributed to the factors not explained by the boycott, i.e. the collapse of oil prices, the oil dependent structure of Venezuela or management inefficiencies, among others.

The fall of production activity in Venezuela has an immediate correlate in the employment level of the population. We can estimate the impact in terms of employment generated by the fall of the real product under the three proposed scenarios. We use coefficients of employment-product elasticity calculated for the Venezuelan economy, which are within the usual values observed for Latin America. The elasticities allow us to anticipate the percentage variation of employment due to a percentage variation of GDP. Although the exercise has limitations, it allows us to have an idea of what would have been the effect of the GDP contraction on employment.

The simulation uses the coefficient of elasticity of 0.47, which means that each percentage point drop in GDP implies a reduction in total employment by half a percentage point. This figure is located within the coefficients for use in the region, which fluctuate between 0.3 and 0.7, depending on the state of the economic cycle.

Using this coefficient of elasticity, we can approximate the loss of jobs that Venezuela would have suffered if there were no instruments to regulate the labor market and the stability of public employment. In particular, the estimate indicates that the actual loss of production would have translated into 2017 in a loss of more than 3 million jobs, that is, 24% of the total economically active population. On the contrary, without the full impact of the boycott, the simulation shows that the accumulated loss of quality jobs by 2017 would be 10% under scenario 1, 13% under scenario 2, and 17% under scenario 3.

The migration literature recognizes that one of the determinants of emigration is the state of the labor market. In this sense, the deterioration of the labor market that we approximate with the previous simulations shows us that the humanitarian crisis that is used as an excuse for US interference in the region is also the result of the crisis induced by the blockade.


Since the arrival of Nicolás Maduro to the presidency and the death of Hugo Chavez in 2013, the financing available practically disappeared and Venezuela suddenly stopped receiving approximately 22 billion dollars per year. It was the only country in the region that suffered this discrimination. The Venezuelan economy, highly specialized in the oil sector, is the most open country in the region but, as a counterpart, depends on the availability of imports. Without availability of foreign currency and imports, Venezuela cannot activate its productive system. In graphic terms, the reversion of financing is equivalent to having launched bombs at the productive infrastructure of the country, including the oil sector.

Despite the methodological limitations of any counterfactual simulation exercise, this work shows that the financial and commercial boycott of Venezuela explains a large part of the crisis affecting the country today. The proposed scenarios, following a criterion of prudence, are realistic scenarios, which reflect what could have happened in the worst case if the country had to face adversity without the onslaught of the international financial boycott. In fact, we could have even raised more favorable scenarios, such as those that facilitated the indebtedness of Argentina and of many governments in the region that had the opportunity to make countercyclical policy by resorting to external financing. No country is in better position to obtain financing than a country like Venezuela, flush with useful natural resources to serve as collateral for international loans. If Venezuela had had external financing proportional to that received by Mauricio Macri in the first three years of his government, it would have had a GDP growth higher than Argentina. Instead of having international support, Venezuela was the only country forced to de-borrow.

As a direct consequence of the financial and commercial boycott, Venezuelans lost between 1.6 and 1.1 GDPs between 2013 and 2017. This represents 245-350 billion dollars accumulated since 2013, that is, between 12,100 and 8,400 dollars per capita. The migrations of Venezuelans to the rest of the world represent a humanitarian problem that requires solution and attention. Unfortunately, the human face of the migration drama was not only caused to a great extent by blockade measures that erode the living conditions of the Venezuelan people, but seems to serve primarily as an excuse to justify US interference.

The sovereign aspirations of Venezuela, its policy of domestic retention of oil income, its initiatives that challenged the hegemony of the dollar, its commitment to regional integration through UNASUR (Southamerican Nations Union) and to a multipolar world, were challenges to US hegemony that had consequences. Perhaps they represented a greater challenge than a country with the limited economic sovereignty of Venezuela could afford.

Venezuela is one of the most integrated countries in international trade judging by the coefficient of external openness. One of the inevitable risks of integration into the financial market is the vulnerability derived from the specialized production structure concentrated in oil production, which means dependence on any avatar in the oil market and little capacity for self-sufficiency in the rest of goods. Venezuela relied on its debt capacity, on its ability to import from various sources under normal conditions, market conditions, and instead what it found were boycott conditions.

It should be noted that the rage with Venezuela is part of a global hegemonic strategy of the United States. It is a shot across the bow of China and other extra-regional countries that dare to set foot in the region in defiance of the Monroe Doctrine.

For USA, control of Venezuelan resources not only represents the re-establishment of the historical conditions of dominion over the region, but also, an economic and competitive advantage that would strengthen the hegemony of the dollar and the competitiveness of US companies against European and Chinese competitors. As we have indicated, it represents an advantage for the US corporations that would be in charge of the extractive industries and an advantage for the whole US economy that would enjoy a reduction in the cost of fuel, both due to direct control of Venezuelan oil resources and the possible withdrawal of Venezuela as a member of OPEC.

The crime of coup d’etat is a violation of international law with economic motivations that is not televised, except on the occasional history channel. It seems that, to prevent history from repeating itself, it is not only necessary to know it, but also to anticipate it, hence our prospective exercise.



[i] Lam, R. and L. Wantchenkon (2002). Political Dutch Disease. NYU…/dutch.pdf

[ii] The challenge of SUCRE to the hegemony of the dollar has not been significant. In part, this is because intra-zone trade, which would explain the demand for sucres, is too small to justify its existence and, in part, because financial and commercial commitments to the rest of the world justify preference for the dollar.

[iii] The Petro represents a serious challenge to the hegemony of the dollar, which is in full development, although, undoubtedly, at a much lower rate of progress than it would have if it did not have the international boycott. The active campaign against the Petro allows us to speculate favorably about its attributes as a tool to break the financial boycott.








[xi] Natural gas reserves data


[xiii] U.S Department of the Interior U. S. Geological Survey. Mineral Commodity Summaries 2017.


[xv] Mónica Bruckmann. Recursos naturales y la geopolítica de la integración Sudamericana, 2011.


[xvii] Mónica Bruckmann. Recursos naturales y la geopolítica de la integración Sudamericana, 2011.

[xviii] Escudé, Carlos (1983). Gran Bretaña, EE. UU. y la declinación argentina. Editorial de Belgrano.

[xix] Rapoport, Mario y Rubén Laufer (2000). Estados Unidos ante el Brasil y la Argentina: los golpes militares de la década de 1960. Editorial Economizarte.

[xx] Since March 2015, Obama declared Venezuela as “an unusual and extraordinary thread to national security and US foreign policy” under executive order number 13692.

[xxi] Difference between income and expenses of the assets and liabilities of the Public Sector of the capital and financial account, in terms of government bonds, commercial loans, and others and loans.

[xxii] Exercises were carried out assuming other scenarios. For reasons of clarity in the exhibition we only present these three, although the totality of the proposed scenarios allowed us to reach similar conclusions. In particular, the alternative simulations presented were based on different financing alternatives or adjustment scenarios.


Traduction: Monica Cohen y Luis Rino