Venezuela Cannot Sink Any Lower

The Chavista assault on the market has turned Venezuela into the least free country on Earth.
The Chavista assault on the market has turned Venezuela into the least free country on Earth. (SudAméricaHoy)

EspañolOn September 15, the Canada-based Fraser Institute released the 2015 Economic Freedom of the World Report. CEDICE Libertad, a Venezuelan think tank and contributor to the annual study, presented the report’s findings in Caracas.

The study measures economic freedom in five major areas: size of government; legal system and property rights; access to sound money; freedom to trade internationally; and regulation of credit, labor, and business.

Dictatorships such as the Republic of the Congo, Libya, Chad, and Syria, came in near the bottom of the list, as expected, and yet these countries are still more economically free than Venezuela, which came in dead last out of 157 nations.

Size of Government

Over the last few years, the number of government-run companies in Venezuela has increased significantly. The state has taken over several private companies using arbitrary procedures, and most, if not all of them, are in the red.

An investigation by Richard Obuchi, Bárbara Lira, and Anabella Abadí, titled “Management in Red,” found that from 2007 to 2010 the Venezuelan government “invested” over US$23 billion to expropriate, purchase, or create so-called socialist companies, including public utilities, steel mills, dairy factories, and coffee producers, among others.

Legal System and Property Rights

The right to private property is likely the most violated constitutional guarantee in Venezuela. The CEDICE Property Rights Observatory, which monitors the state of property rights in Venezuela, has reported systematic violations since 2007. The executive, legislative, and judicial branches have all either attacked or failed to uphold property rights in some manner during this period.

The Venezuelan government has at its disposal a large toolbox to undermine property: from outright expropriation, to taking over management, and setting limits on profits.

Access to Sound Money

Based on data from the Venezuelan Central Bank, economist Willians Ruiz estimates Venezuela’s public debt at US$116.5 billion as of the third quarter of 2014. Even though Venezuela has earned more revenue from oil exports in recent years than ever before, the government’s debt has grown to an all-time high.

For Ruiz, executive director of the Mises Institute Venezuela, the debt increase stems from policies aimed at deliberately undermining property rights, weakening them in some cases and eliminating them altogether in others.

Freedom to Trade Internationally

Tight foreign currency controls, which have been in effect for over a decade, are enough to cripple Venezuela’s international trade. The regime imposes hurdle after hurdle on both importers and exporters, not to mention the endless bureaucracy and regulations. For example, businesses must declare all incoming foreign currency and sell a percentage to the local market.

Regulation of Credit, Labor, and Business

The regulation of entrepreneurial activity, credit, and labor is widespread in Venezuela.

[adrotate group=”7″]

The 2012 Organic Law of Labor and Workers makes it almost impossible to fire workers and brought about stagnation in the job market. Consequently, job creation is almost non-existent.

In addition, the Venezuelan government has enacted policies that stifle the private sector. Not only do we have rigid price and forex controls, but businessmen can face serious prison time for violating extremely broad rules.

It’s no surprise that Venezuela comes in last in the world in economic freedom, but the report also reveals an additional consequence.

The annual ranking includes a study on how economic freedom affects life satisfaction and how much control individuals perceive they have over their own lives.

Taking into account all the variables that create the opportunities to pursue one’s preferred lifestyle, Venezuela then is not only the world’s least free economy, but the least free country in general.

Translated by Adam Dubove.

Subscribe free to our daily newsletter
Sign up here to get the latest news, updates and special reports delivered directly to your inbox.
You can unsubscribe at any time