by Bill O’Grady

Venezuela has gone from “bad to worse” in recent years.  In 1999, Hugo Chavez was elected president and took the country on a journey into Cuba-style socialism.  Persistent government intrusion into the economy reduced private sector involvement.  Although the oil sector was able to generate enough revenue to allow Chavez to fund his socialist programs (and provide oil to allies at reduced prices), the lack of investment and falling oil prices put the economy in dire straits.  After Chavez died in 2013, Nicolas Maduro has been the nation’s chief executive.  He has presided over an accelerating political and economic disaster.

Maduro’s mismanagement has led to a migration crisis.  Millions of Venezuelans have already fled and surveys suggest many more are considering that alternative.  The massive outflow of people is causing severe strain on Venezuela’s neighbors and could eventually become a problem for Mexico and the U.S.  In Part I of this report, we review Venezuela’s economic and political situation.  Part II will begin with a discussion on migration with a focus on emigrant flows.  We will include an analysis of the problems caused by migration, followed by an examination of the possible end to this crisis and the broader geopolitical issues.  As always, we will conclude with potential market ramifications.

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