Will PH become another Venezuela?
Recent news reports coming out of the South American country of Venezuela are very alarming. Hunger has become so widespread, with almost 90 percent of the population now reduced to poverty, and 64 percent of Venezuelans losing an average of 11 kilograms in body weight last year, according to reports.
Venezuela’s inflation rate is predicted to reach an astounding 1 million percent this year. In 2010, one American dollar was worth eight bolivars, the Venezuelan currency. Today, it’s worth 200,000 bolivars. Severe shortages of food, medicine and necessities are causing riots, crimes and the mass exodus of Venezuelans to other countries.
There are worries that the Philippines may become the next Venezuela, with our own slowing economic growth, rising
inflation and political turmoil.
Venezuela was once the richest country in South America, while the Philippines was once the second most economically progressive country in Asia, next to Japan.
Venezuela’s wealth was anchored on its oil exports; it holds the world’s largest supply of crude oil. What counts as the Philippines’ exported wealth are the 10 million Filipinos living or working abroad who send billions of dollars in earnings back home.
Because of big gaps between the privileged few and the marginalized majority, widespread disenchantment catapulted populist leaders like Hugo Chávez and Rodrigo Duterte to the presidencies in both countries. After Chávez died in 2013, his successor, Nicolás Maduro, continued his policies.
Both Chávez (now Maduro) and Duterte shifted their respective country’s foreign policy, adapting an antagonistic posture toward the United States and its allies, while cultivating friendlier relations with both China and Russia.
Chávez used the huge oil revenues of his government to embark on well-meaning antipoverty initiatives. He funded thousands of free medical clinics for the poor, provided substantial subsidies for food and housing, infused abundant state support for education, and gave significant assistance to indigenous people. Chávez also nationalized companies in vital industries like oil, steel, banking, tourism, agriculture, mining and cement.
When oil prices fell by 70 percent, Venezuela’s revenue source dried up, because it is 95 percent dependent on oil exports. There are also accusations of corruption, mismanagement and inefficiencies in the nationalized businesses. Venezuela now suffers from runaway inflation, lack of foreign exchange, huge debt and economic sanctions imposed by the United States and others. Venezuela accuses these countries of waging an “economic war” to topple the Maduro government, while these countries, in turn, accuse Venezuela of destroying democratic institutions.
In the case of the Philippines, the billions of overseas income remittances represent wealth belonging to and spent by Filipino citizens, and not state-owned revenues. The potentially disastrous consequences of impulsive policies of the Duterte administration will, therefore, be more limited. At worst, these policies will only involve wasting the tax revenues generated from the spending and investments of OFW families.
However, there’s a looming convergence of events that can make the Philippines experience the Venezuelan tragedy to a troubling degree. These are: the shift to federalism, which will drain or mess up national government revenues; the recent Supreme Court decision precipitously reducing to 50 percent the national government share in taxes; expensive Chinese loans; economic sanctions due to extrajudicial killings; widening budget deficit; rising prices due to the TRAIN Law; spiraling oil prices; world market instability due to threats of military war, trade wars and natural disasters; decreasing overseas employment; and shrinking foreign investments.
Venezuela is on the brink of economic collapse because of rushed and carelessly studied policies, and lack of contingencies. The Duterte administration must ensure that it will not take the Philippines on the same road to perdition.
Comments to email@example.com
Subscribe to INQUIRER PLUS to get access to The Philippine Daily Inquirer & other 70+ titles, share up to 5 gadgets, listen to the news, download as early as 4am & share articles on social media. Call 896 6000.