The Human Cost of Venezuela’s Capital Control Nightmare
While their country is experiencing the worst economic crisis in its history, many Venezuelan professionals have had to look outside their borders for better opportunities.
Many Venezuelans aspire to leave the country since the highly politicized Central Bank has completely devalued the national currency, the bolivar, with its inflationary policies.
But those seeking economic exile must also face capital and currency controls in order to leave in the first place. First implemented by Hugo Chávez in 2003, these measures were used to stem the capital flight caused by the 2002 oil workers’ strike.
These capital controls started out as measures that targeted the rich in order to supposedly reign in their greed and their ability to move vast sums of capital abroad.
History, however, has shown that regulations that start out solely targeting the rich eventually turn into all-encompassing controls that affect all social classes.
In Venezuela, currency controls have recently evolved into travel allowances that limit the amount of foreign currency that citizens can use on their foreign travels.
These limits have varied from year to to year but, as of 2015, Venezuelans can only take US$2000 with them on trips abroad. Additionally, travelers heading to the United States will also have reduced cash quotas of $700 at their disposal.
Naturally, this represents a major obstacle for many Venezuelans whose trust in the dollar is much higher than the devalued bolivar. In effect, these measures serve as a “barrier of exit” for many Venezuelans.
History has shown that regulations that start out solely targeting the rich eventually morph into all-encompassing controls that affect all social classes.
Only skilled professionals or those with foreign bank deposits in dollars can get by abroad. Professionals must still brave months of job searches with the looming threat of their paltry dollar allowance running out during this time frame.
Venezuela’s poor, on the other hand, unfortunately do not enjoy these advantages and are effectively trapped inside the country. Unsurprisingly, 90 percent of Venezuelans who have fled after the Bolivarian Revolution are university educated professionals, with a significant minority belonging to a higher income segment.
So although the government implemented currency controls in order to prevent capital flight, there was a more sinister motive behind the measure: the control of the Venezuelan populace, especially its ability to move in and out of the country.
The recent flight of Venezuelan professionals is essentially a brain drain; some of the country’s most talented individuals must search for greener pastures abroad due to the unfavorable economic and political circumstances in their country of origin.
This case is all too familiar in Latin American history. In recent decades, Colombians, Cubans, Guatemalans, and Salvadorans have had to leave their countries en masse due to unfavorable economical, political, or social circumstances.
Contrary to popular belief, “brain drains” may actually yield net benefits to the the exiles’ countries of origin. Michael A. Clemens, a Senior Fellow at the Center for Global Development (CGD), notes that migrants have the ability to “transfer money, skills, and even democratic ideas” to their native countries.
However, these potential benefits may never come into fruition if governments decide to impose limits on migration.
In a globalized era in which travel is becoming increasingly affordable, citizens have more power than ever to forge their destiny wherever they see fit.
Ideally, nation states in a globalized world should be competing with each other in order to attract the most talented workers across the globe. In the 21st century, no citizen should be treated as a serf who is bound and shackled to his homeland.
[adrotate group=”7″]Sadly, governments that impose primitive mechanisms of control such as Venezuela’s have different ideas.
The true culprit of Venezuela’s economic tragedy is the lack of respect for economic freedom during the past 50 years. For Venezuela to overcome this dark chapter in its history, it must abandon both the socialism of the present and the soft-socialism of its not too distant past.
Only a system of capitalism based on the rule of law and the respect for individual and economic liberties can correct the policy flaws of the past 50 years.