Can Venezuela Become an Investable Economy Again?

During their recent episode, Taylor, Carlisle, and Francisco Amador discussed Can Venezuela Become an Investable Economy Again?. Here’s an excerpt from the episode:

[Francisco] Well, I think there’s probably two questions in there. Because making it investable doesn’t necessarily mean you want to have it totally modernised. I think there’s going to be a point where the big catalyst most people are looking for are elections.

So I think once you have democratic elections and the consensus view becomes that this is a democracy and things are going to get better, I think that’s when it probably becomes investable in the minds of a lot of people. In terms of actually modernising the country and fixing a lot of the stuff that got messed up in the past 20 years.

[Jake] Is all the infrastructure underinvested in basically? Yeah.

[Francisco] And to be clear, I don’t want to give the wrong impression because a lot of people think of Venezuela and you think of Afghanistan or some country that was at war. It’s not the case at all. You’d be surprised how beautiful and actual infrastructure like highway system and all that.

Remember, Venezuela used to be one of the richest countries, certainly in Latin America in the 70s, 80s and even in the early 90s. So a lot of stuff got built. So it’s a lot more about replacement and maintenance capex and things like that.

But it’s not like you have to build highways or airports or things. So that’s why my answer is probably something in the five year. You could probably do a lot of stuff in five years.

But there’s stuff that needs to be done in the electric grid and oil and gas, obviously. Airports and ports probably have to be expanded. Some highways probably need to get fixed and stuff like that.

And same with manufacturing plants and all that. But the stuff on the private sector is probably just going to happen a lot more naturally from just people seeing the return expectations come back.

[Tobias] What about like rule of law and contract enforcement and that sort of stuff? Because to me, that’s the thing that makes it investable.

[Francisco] Yeah, certainly. So I think that goes very much along with what I was saying about the elections. If you look at what’s currently being, the reforms that are currently being worked on or sort of taking place, a big one is around the Supreme Court.

So that’s got to be fixed to a point where people are comfortable investing in a country where there’s an independent body and a legal system that you can trust on. I mean, it’s not going to get to a US level or anything close to that. But at least for Latin American standards, give enough comfort to investors where you know.

Because Venezuela used to be known for expropriating assets, especially Chavez. In the probably 2006 to 2012 years, they expropriated, nationalised a lot of stuff, a lot of stuff that got taken away without even paying anything for it. This is where a lot of these claims that I was talking about come from as well.

So yeah, definitely a huge part of these reforms that are taking place are sort of reinstating these very basic bodies of the government, the equivalent of Congress, which is the National Assembly, all of that stuff that used to be controlled by an authoritarian regime. Now, it’s going to take some time as well for that.