Contemporary Authors

• Crude Nation: How Oil Riches Ruined Venezuela University of Nebraska Press (Lincoln, NB), 2016

• Raul Gallegos - http://raul-gallegos.com/about/

  ABOUT

  I am a senior analyst for consulting firm Control Risks based out of Bogota, and author of the upcoming book Crude Nation: How Oil Riches Ruined Venezuela, to be published by Potomac Books on October 1, 2016 (Pre-order the book: amzn.to/1TVYSL2). Before joining Control Risks I worked as a contributing analyst for the Economist Intelligence Unit. I have also been a featured Latin America opinion writer for Bloomberg View, the editorial division of Bloomberg, and have worked as a financial columnist for Reuters Breakingviews, the analysis and commentary unit of Thomson Reuters.

  For five years, I served as Caracas-based correspondent for Dow Jones and the Wall Street Journal covering Venezuela’s economy and its oil industry, and as a member of Dow Jones’ OPEC coverage team in Vienna. For several years I covered U.S. financial markets and emerging markets corporate and sovereign fixed income, and led a team of journalists covering Wall Street for Institutional Investor in New York.

  My columns and articles have appeared in the pages of the Los Angeles Times, the Miami Herald and Slate, as well as newspapers across Latin America, Europe and Asia. I have also appeared as a guest commentator on CNN en Español, the Spanish language division of CNN. I hold a BA in economics from the University of California at Berkeley, a master’s degree from Columbia’s School of International Affairs, and a second master’s degree from the Columbia Journalism School. I was a 2010 Knight-Bagehot Fellow at the Columbia Business School. I grew up in El Salvador during a time of civil war and currently live in Bogota, Colombia.

Crude Nation: How Oil Riches Ruined Venezuala
Publishers Weekly.
263.24 (June 13, 2016): p83.
COPYRIGHT 2016 PWxyz, LLC
http://www.publishersweekly.com/
Full Text: 
Crude Nation: How Oil Riches Ruined Venezuala
Raul Gallegos. Potomac, $34.95 (256p) ISBN 978-1-61234-770-7
Venezuela's economy is imploding, and Gallegos, a Latin America analyst and former Wall Street Journal oil correspondent, writes a timely,
important book on what went wrong, which is a lot. Sharply written and vividly detailed, the book documents how Venezuela's oil reserves--the
world's largest--subsidize an unsustainable life for its citizens. Hugo Chavez, elected president in 1998 on a socialist platform, triggered the most
recent disasters, but the country's ills are structural and attitudinal, Gallegos shows, going back to the boom years of the 1960s. The onecommodity
nation has an infrastructure in shambles; electricity is iffy, and drought looms over a country that generates more than half its power
hydroelectrically. The national debt and inflation rate are staggering. Many fed-up foreign banks and bondholders fear default. The nation's elites
exhibit astonishing self-interest, rapaciousness, and superficiality. The rich, whom Gallegos describes as "obsessed with physical beauty," spend
their money in salons and on plastic surgery, while others go hungry. Facing destitution, Venezuelans remain convinced that oil will come to their
rescue. According to Gallegos, "Venezuela became a different country when it discovered crude." The arrival of the petro state has led to an
"insane economy" that Gallegos hopes will provide a "moral lesson" for other nations. (Oct.)
Source Citation   (MLA 8th
Edition)
"Crude Nation: How Oil Riches Ruined Venezuala." Publishers Weekly, 13 June 2016, p. 83. General OneFile, go.galegroup.com/ps/i.do?
p=ITOF&sw=w&u=schlager&v=2.1&id=GALE%7CA458871738&it=r&asid=77c251055b44710e63baf4649039f553. Accessed 4 Mar.
2017.
Gale Document Number: GALE|A458871738

• Paul Musgrave
  http://www.paulmusgrave.info/2017/01/17/crude-nation-raul-gallegos-review/
  Word count: 1281

  Crude Nation, Raul Gallegos [Review]
  2 Replies

  Cover for Raul Gallegos, Crude Nation

  One of the punchiest descriptions of the “resource curse” comes from Venezuelan oil minister and OPEC founder Juan Pablo Perez Alfonso, who called oil “the devil’s excrement”. Yet the saying obscures more than it reveals. Perez Alfonzo’s pessimism about oil dated to an era before contemporary scholarship admits of an oil curse (the most recent resource-curse literature argues that the curse began in 1980 or so, and Perez Alfonzo’s bon mot dates to 1975). It is also the money from oil, not the properties of petroleum itself, that is said to be the cause of the curse, whether through the knock-on effects on productive sectors’ competitiveness through the Dutch Disease of currency appreciation or the conversion of productive competition into indolent rent-seeking through the corruption of political institutions by the replacement of taxation.

  The biggest problem for Perez Alfonsz’s wit, however, is the simple fact that for much of the twentieth century, it was hard to say that Venezuela had been particularly cursed by oil revenues.

  The statistics suggest that oil simply made Venezuela richer than it would have otherwise been (assuming that its neighbors supply a good idea of its counterfactual, non-oil-based economic outcomes). Similarly, Venezuela’s Polity score (a measure of democracy) show that the country was ranked most democratic by outside experts during periods of high oil income, and only began a slide away from a Polity score as high as France’s when oil prices entered a prolonged depression in the 1990s.

  Since the leftist government of Hugo Chavez (and, since his death, Nicolas Maduro) came into power in 1999, however, all of this has changed dramatically. Today, Venezuela does indeed seem to have been cursed by oil wealth in some fashion, as Raul Gallegos documents in Crude Nation, a fine, readable survey of contemporary Venezuelan life, based on his work as a reporter in the country.

  Gallegos has an unstinting eye for detail and a knack for the telling anecdote. He chronicles the despair and steady crumbling of free enterprise, political competition, and, indeed, contemporary society that has marked Venezuela’s recent history.

  Many of the passages in the book deal with the ordinary business of life in a country where politicians have sought, and failed, to use oil revenues to bring about a socialistic revolution. Ill-conceived government projects aim to use oil rents to subsidize staples for the populace, but much of them end up on the black market in Columbia as the result of energetic smugglers in border towns. Constant currency devaluation has made importing all but impossible and rampant inflation has converted much of the country away from a monetized basis and into a barter one, in which a pickup truck is a better store of value than a bank account. Emblematic of the failed attempts to impose command-and-control systems in a formerly mostly marketized economy is a nationwide shortage of toilet paper.

  The collapse of the money system is impressive–indeed, it competes with other instances of hyperinflation.

  Boeing 747 planes filled with cash landed in Venezuela’s airport every two weeks in 2015, carrying anywhere between 150 and 200 tons of bills (roughly 150 million bills) packed in large crates that are unloaded using a special railing system. Experts in the bill-printing business estimate that Venezuela will need 10 billion new bills in 2016, which amounts to one third of the total printing capacity controlled by all the money-producing private companies in the world. (p. 23)
  (Recently, of course, the Maduro government has exacerbated (!) the currency crisis.)

  The political system has similarly faced collapse. Maduro’s constituents must resort to novel ways of catching their government’s attention, including one woman who wrote a request for aid on a melon which she tossed to the president, inadvertently (one presumes) catching him on his noggin. And as the bizarre shortages and weird excesses of the economy continue apace, political connections help to smooth the way for those connected for the regime. Elite members receive payoffs that apparently total in the billions; less-well-connected supporters exchange muscle and intelligence for apartments and motorcycles.

  One regards this with puzzlement. Gallegos is understandably critical of Venezuela’s current government, as well as previous regimes, but the machinations of an earlier generation leaders like Perez Alfonso display a dazzling capability for craftiness. In the early postwar period, Perez Alfonso sought to strike better deals with oil majors, arriving at the coveted “fifty-fifty” agreement (sharing fifty percent of royalties with the majors, far better than prewar imperialism). But this success posed a further problem:

  A shrewd Perez Alfonzo realized that it was cheaper for oil companies to produce oil in the Middle East than in Venezuela. To address this, a delegation of Venezuelan officials traveled all over the Middle East with copies of Venezuela’s fifty-fifty agreement translated into Arabic, promoting its adoption. Soon Saudi Arabia forced similar terms on foreign oil companies…Venezuela’s fifty-fifty arrangement had become the norm in the oil world.
  Such cleverness merits more attention from IR theorists thinking about how common knowledge and focal points can radically upset institutions based on rimless hub-and-spoke arrangements.

  As one might have guessed by now, my biggest complaint with Gallegos’s book is not the reportage (excellent) or the historical work (first-rate for a non-academic work and will be on future syllabi for that reason). It is that Gallegos still, overall, subscribes to the idea that oil caused Chavez’s ruinations. But this seems to omit the fact that plenty of oil-rich countries have managed to avoid the worst excesses of centrally planned economies while still managing to provide massive welfare states; I call the Gulf oil-rich states “Soviet Arabia” precisely because of the way that state planning and centralized authority coexist in this manner.

  Ironically, what stands out in Gallegos’s account is the way in which a relatively small country (in population terms) has managed to turn its massive oil revenues into the means of establishing a Soviet-style basket case. Descriptions of ordinary economic and political life in Chavez-Maduro’s Venezuela resemble nothing so much as descriptions of the tedium and tawdry corruption of Brezhnev-era Soviet politics, leavened with cynical quasi-Maoist cadres mouthing slogans that contrast bleakly with the decay all around. Most oil-rich countries not named “Norway” have tended toward either a Saudi-style welfare state (laced with varying degrees of moral regulation) or a Equatoguinean paradise for predators. Yet Venezuela’s collapse looks not like any of the standard oil-bred malaises, but rather the typical end-stage of a failed Communist state.

  That suggests that oil was neither necessary nor sufficient for the country’s problems. Yet one wonders whether the sorts of institutional defects that Venezuela has now have their roots in oil nevertheless. Without oil, would a Chavista revolution have been quite as appealing? More deeply, as Gallegos recognizes, oil and the accompanying macroeconomic distortions long provided rents (through currency arbitrage among other, more direct rent-provision) to the country’s elites. If Chavistas are consuming some fraction of their rents in failing to build a worker’s paradise, that is not necessarily different in kind from the more ordinary cronyism of earlier oil-fueled governments.

  Teasing out the details of the ways that resource rents affect politics remains an active research program. Institutions may be endogenous on the way that petrol rents interface with state development. And Perez Alfonzo may yet be proved right in his diagnosis of petroleum’s problems.

• Failure Magazine
  http://failuremag.com/book_review/article/crude-nation/
  Word count: 1051

  Crude Nation
  How Oil Riches Ruined Venezuela, by Raúl Gallegos, Potomac Books.
  Review by Jason Zasky Filed under Book Reviews

  “History is littered with examples of strange economic happenings, but they occur mostly in places suffering bouts of high inflation, usually in countries at war. In a Venezuela that has been at peace for decades, something turned the country’s economy on its head and kept it there.” So writes Raúl Gallegos in “Crude Nation,” a book-length look at “the world’s craziest economy,” one which inspires its citizens to spend their money as quickly as they can, as the bolivar has been losing value for years on end and is now virtually worthless against the world’s major currencies.
  One of the things that makes the Venezuelan economy so strange—and so fascinating—is that “in recent years, the country’s government earned roughly $100 billion annually from oil sales,” notes the author. Yet it doesn’t have the money to invest in its oil sector, and the Venezuelan people suffer from a chronic scarcity of food and consumer goods, including many products that most Americans take for granted, like toilet paper and diapers.
  It’s important to note that Venezuela—found twenty-seven hundred miles south of the U.S. border in the northernmost part of South America—controls the largest proved oil reserves in the world, almost 300 billion barrels. Know too that oil is relatively inexpensive to produce in Venezuela; with oil readily accessible, exploration costs are minimal. Consider that the country’s oldest field, Lagunillas, discovered in 1913, could provide sixty-two more years of oil at current production rates, while the Cerro Negro field, discovered in 1979, could continue delivering 431,000 barrels a day for another 767 years. Yet as Gallegos reveals, the Venezuelan government has mismanaged the country’s oil money, using it to subsidize social programs and foster voter support, which has led to hyperinflation.
  As a result, Venezuelans display decidedly strange economic behavior, which Gallegos witnessed firsthand during his stint as a Caracas-based reporter for Dow Jones Newswires and The Wall Street Journal. In fact, Gallegos experienced the oddball economic effects himself, noting that during the years he lived in the country, his rent got cheaper every month. His was not an isolated case; in the book he relates the experience of a Venezuelan attorney who purchased an apartment in an attractive neighborhood in the capital in 2008; eight years later the money said attorney spent to buy the apartment would barely cover the cost of an Apple iPhone 6, and his current mortgage payments are worth “about the cost of a cab ride to the airport.” Yet the protagonist in the story has little incentive to pay off his mortgage early, because the loan payments effectively cost him less and less every month.
  “Venezuelans have learned to prize fleeting things such as physical beauty, cars, and flashy consumer goods today, because they may not have them tomorrow,” explains the author, noting that beauty salons and plastic surgeons do a reliably brisk business, even in the face of economic crisis. Venezuelans “spen[d] their money as quickly as they [can] on pretty much any consumer good—a television, an air-conditioning unit, brand-name clothes—saving nothing,” continues Gallegos. “They eagerly [take out] any loan a bank [is] willing to extend, almost regardless of the interest rate charged. For decades, Venezuelans have been brought up to think that saving money in a bank is the fastest way to lose it.”
  Gallegos does a fine job of relating how the Venezuelan economy works, which isn’t as easy as one might think. Consider that a commodity can actually have four different prices (you’ll have to read the book to learn why), which results in the cost of living in Venezuela being among the cheapest and most expensive in the world—at the same time. He also explains: how what you pay may be determined by who you are and what you do for a living; how the value of used cars rises over time; and why a full tank of gasoline can be had for mere pocket change, among other oddities.
  Notably, Gallegos devotes the lion’s share of one chapter to the nation’s chronic shortage of toilet paper, and also highlights the government’s frustration with “nervous purchases,” where citizens attempt to buy as much as they can, when they can, because they don’t know when they will see, say, toilet paper, again. The scarcity of select products has led countless Venezuelans to abandon their day jobs to work as bachaqueros, who do nothing more than acquire and re-sell scarce goods at a hefty markup.
  The author also does an admirable job of recounting the country’s century-long oil history, part of the buildup to the final chapter, in which Gallegos addresses the measures Venezuela could and would need to take to get hyperinflation under control and stabilize the economy, measures that could include following in the footsteps of Zimbabwe and Ecuador, both of which have adopted the U.S. dollar as currency.
  It’s clear though that policy changes alone won’t be enough to stabilize the Venezuelan economy. For one, Venezuelan citizens will need to break their addiction to spending and learn to spend and save responsibly.
  “Giving Venezuelans a compulsory and basic economic education is of paramount importance,” begins Gallegos. “The country will continue to make the same mistakes of the past century if people lack the basic understanding of the way money works and the problems that have shaped Venezuela into what it is today,” he offers.
  At this point one wonders if the country’s ever-increasing economic pain will ultimately motivate the government to change its approach—and the populace to change its behavior. If not, Venezuela’s economic future looks bleak—or, bleaker than it already is.
  “No amount of money has ever been enough for Venezuela to become a stable, well-managed country,” concludes Gallegos. “No amount of money has helped Venezuela consistently reduce poverty. In fact it often seems as if the more money Venezuela earns, the worse off it becomes. Venezuela has become a country with no future that lives only in the present.”