Doug Casey, 2/8/19.
Justin’s note: Venezuela is in a state of despair.
The country’s economy
has collapsed… inflation is through the roof… and food and medicine shortages
are rampant.
But there’s hope. I say
this because Venezuela has a new president. Well, sort of… You see, Juan Guaidó
just elected himself interim president of Venezuela.
And many countries,
including the United States, now recognize Guaidó as Venezuela’s active president
instead of Nicolás Maduro.
It’s a promising
development, and not just for Venezuelans. As you’re about to see, a major
crisis investing opportunity could be shaping up there…
Justin: Doug, how do you see the situation in Venezuela
shaking out?
Doug: Well, it’s a bit of a complex question because
Maduro is the “legally” elected president of a supposedly democratic country.
Now, I say that with the proviso that I don’t believe in democracy as a way of
organizing the world. Democracy is really just mob rule in a coat and tie.
Of course Maduro’s
election was rigged, which is so very often the case in Latin America, Africa,
most of the Third World. And even the United States, for that matter.
Since election fraud is
the case almost everywhere, you can’t hold that against the guy. He’s really
just working within the system. That’s just the way things are. He’s actually
the president, like it or lump it. Venezuela isn’t Switzerland…
Justin: Interesting. And what do you
think of Guaidó? Many Western countries have recognized him as the acting
president of Venezuela.
Doug: Guaidó is conducting a coup d’état. Or a golpe, as they say here in Latin
America. The army and the police – who have all the guns – have apparently
declared for Maduro. Of course Venezuela has something like 2000 generals – an
almost unbelievable number. I’m sure most of them, as well as thousands of
colonels, are living high off the hog and don’t want to see a change.
On the other hand, the rank
and file are likely sympathetic with the common people. They may desert if
pressed. Or maybe some charismatic captain or top sergeant will rise up.
Anything is possible. Including an actual civil war. Anything’s possible in a
country suffering a total economic disaster.
Now, just to be clear, I despise
Maduro. He’s a thug, a criminal, and a socialist with an IQ of – I’m guessing –
about 90. But give him credit. He’s totally destroyed what was once the richest
country on the continent, and that takes special talent. Even Clinton, Bush,
and Obama in sequence couldn’t do that to the U.S.
If you listen to him talk,
he uses very simple Spanish. Even with my very substandard Spanish I can
understand him perfectly when he speaks. That’s because he uses very simple,
bus driver-type language. You can easily imagine him in his bus driver’s
uniform, piloting around the streets of Caracas. But he’s said some things that
are quite intelligent.
Justin: What sort of intelligent
things has he said?
Doug: Well, when Trump seemed to
threaten an invasion, he said, “Are you going to repeat a Vietnam in Latin
America?”
It was a very intelligent
question to ask. Even people that hate Maduro may decide that it’s such an
affront having American soldiers invade their country that it could easily turn
into a Vietnam. They’ll figure the U.S. is there to steal their oil.
It’s quite stupid – not to
mention illegal – for Trump to say, “We don’t like your regime so we’re going
to send troops in to change it.” It’s just asking for trouble. It’s as if the
U.S. learned absolutely nothing from trying to change regimes in a score of
countries since the end of WW2.
Another intelligent thing
Maduro said is, “Everything depends on the level of madness and aggressiveness
of the northern empire.” He was referring to the United States, of course.
For many years the U.S. has,
in fact, been acting like an empire. But not so much like the Roman Empire,
which conquered and occupied places. Although, the U.S. does that, too. That’s
why we have troops in South Korea, Germany, Japan, and scores of other
countries. The U.S. is more like the Athenian empire, which was effectively a
commercial empire, as opposed to a military empire.
Maduro’s quite correct.
Americans are not always the good guys. If a visitor from Mars were to examine
this planet, they’d have to say the most dangerous entity in the world today is
the U.S. government. I know most Americans may be affronted to hear that. We’re
used to thinking of ourselves as the “good guys.” And that’s true, when it
comes to our culture and civilization. But the U.S. government has a life of
its own. It’s different from the country. Just as Venezuela’s government, and
the attached Deep State, isn’t the same as the average Venezuelan.
Maduro also said that, “It’s
as if I told the European Union that I’d give it a few days to recognize the
Republic of Catalonia.”
He was referring to when
Catalonia attempted to break away from Spain in October 2017. And he’s
absolutely correct. I was
100% on the side of the Catalans in that misadventure. Governments shouldn’t
stick their noses into other people’s business. Major wars can start over
trivial incidents. WW1 is the perfect example.
Some of Maduro’s observations
are intelligent and correct. But I’d still say he’s a borderline moron,
the AOC of South America,
judging by everything else he’s done and believes. That doesn’t mean that he
can’t say intelligent things from time to time.
Justin: What are the chances Trump
sends troops to Venezuela?
Doug: Well, Trump is a genuine
loose cannon. He has no core beliefs, just gut feelings. He flies by the seat of
his pants and seems to be capable of doing almost anything on the spur of the
moment.
Trump likes to show
strength. He likes to demonstrate that he’s a tough guy who can’t be bluffed.
He’s quite capable of invading, on some pretense. There are plenty of precedents
for that sort of thing. Don’t forget the U.S. actually invaded Grenada, which
was about as illegal as Hitler invading Poland in 1939 or Japan invading
Manchuria in 1931.
The U.S. also invaded Panama
on the pretense of its president dealing in drugs. Another completely illegal
invasion. It nearly invaded Cuba with Bay of Pigs incident in 1961. Haiti, the
Dominican Republic – the U.S. treats countries in the Caribbean as satrapies in
its empire. It doesn’t treat them like real countries. Which is ironic, because
in most cases they aren’t real countries – they’re banana republics, run by
kleptocrats. But that’s beside the point. It’s very bad policy to do this type
of thing, on several levels.
So, sure. Trump is entirely
capable of sending in the Marines.
Justin: Interesting. Doug, I’ve
become friends with quite a few Venezuelans during my travels. They fled to
countries like Colombia, Argentina, and Peru because the situation at home was
so unstable.
And many of these people are
very hopeful about the future of Venezuela in light of what’s happened lately,
specifically Guaidó’s rise to power.
Do you share this optimism?
Do you see things getting better in Venezuela?
Doug: Yeah, that’s a great
question. Venezuela’s biggest problem is that it’s sitting on a huge amount of
oil. Possibly the world’s largest reserves, although it’s mostly heavy,
high-sulfur sludge – not light, sweet crude. However, the quality of the
hydrocarbons isn’t the problem. The problem is that it’s all owned by the
State. That means anybody that wants to be wealthy and powerful has to get
control of the State. Or be a crony.
These people will continue
fighting for it. They’ve totally politicized the country’s economy.
How would I solve the
situation? It’s essential to get the power and money out of the hands of the
State. The only way to defuse this situation is to probably take 100% of the
State’s shares in the Venezuelan oil company, and divide them, pro rata, to all
the people in the country.
In fact, do that with all
the State’s assets. I’ve pitched a program like that to a dozen governments
over the years. It’s become a hobby, and I’ve written about it [Editor’s Note:see here and here]. This would give the
average Venezuelan a stake in the government’s assets.
Of course they’d also have
to install an impeccable board of directors who wouldn’t use it as a vehicle to
enrich themselves – at least, not too much. That’s unlikely, I know. Just a fun
thought…
Justin: Doug, you’ve had a lot of
success speculating in markets that the average investor wants nothing to do
with.
Do you see a crisis
investing opportunity shaping up in Venezuela?
Doug: Well, here’s the thing.
Venezuela is a huge country. It’s 30% bigger than Texas. There are only 30
million people, including lots of European immigrants. It’s potentially
immensely wealthy. Huge possibilities in every regard. The only thing wrong is
the political system. Mining, tourism, ranching, farming. It should be an
industrial powerhouse, too. But, like every country in Latin America, the labor
laws, taxes, regulations, and currency debasement make real development very
risky.
The good news is that
Venezuela is still going to be there. Regimes come and go. Unfortunately, it’s
still going to have problems because of the ingrained culture, and the oil
situation.
Which brings us to your
question. Is there any way that we can profit from all of this?
I’m reasonably familiar with
both real estate speculation and Latin America, having been to every country in
Latin America, in most cases a number of times. I’ve lived in three.
You can buy an apartment in
Venezuela for very cheap now. It’s said real estate prices have fallen about
60% in just the past year. I’ve looked at the websites to get an idea of what
prices are. They look very cheap for what you get. But the numbers are
meaningless.
It’s going to depend on what
you offer the guy and how desperate he is.
Justin: Where would you consider
buying real estate in Venezuela? Caracas is one of the most dangerous cities on
the planet these days.
Doug: Caracas would not be the
first place I’d want to buy. Caracas has turned into your classic shithole. The
city’s basically in a valley surrounded by hillsides covered with what they
call “ranchos” full of poor people. In Brazil, they call these neighborhoods
“favelas.” Every Latin country has its own name for the slums where people
build their houses out of cardboard and flattened tin cans.
There’s one partially
completed skyscraper I know of. Probably 30 stories tall. It’s been abandoned,
but it’s occupied to at least the 20th floor with squatters. No higher, I
guess, because of the logistics of hauling water and such.
But the mobs of people are
just one problem with Caracas. The electricity probably doesn’t work half the
time. The water can’t be trusted at this point.
Fortunately, it’s a huge
country. So I would go to one of the outlying cities and look to buy a farm –
although I’m sure all the farms and ranches in the country have gone to seed,
the cattle stolen and slaughtered by starving people. Most important, it’s
probably very hard to get a good title to a piece of property once you give the
owner money for it.
But I’ve always said I’ll
buy anything if the price is right. You might find the right desperate seller
who’s just totally fed up. And you may get the bargain of a lifetime. It
happens all the time, all over Latin America.
This can be an excellent
time to go shopping, if not particularly in Caracas, which is just too sketchy.
You could find something good in one of the other cities, and particularly on
Margarita Island, in the Caribbean. It has certain advantages because it’s not
really connected to the mainland and its problems. It’s a center for all kinds
of offshore activity, like gambling. It has the beaches. I’d look at that
first.
But it’s something where
you’ve got to put boots on the ground. Before buying anything, you’ve really
got to spend a month there.
Justin: Why is that?
Doug: All kinds of problems are
going to arise. For one thing, you should really occupy something once you buy
it. In Latin America, there’s a big problem with squatters. If you own land but
you don’t visit it or manage it, you could eventually find somebody else living
there.
After a few years, they have
a legal argument that it belongs to them. So, it’s a tremendous opportunity but
one that has to be acted on carefully. Should you do it? Look, I should
have bought that castle outside of Umtali in Rhodesia in 1979 for $85,000; it sold
for $13 million five years later. But I would have had to live there. Long
story.
There’s little question in
my mind that Maduro is going to be out. If he’s smart he’ll grab his billion
dollars and leave now. The new guy will seem like a reformer for a few years,
then probably turn into a criminal who’s looking to steal his own billion
dollars. Of course a renaissance is always possible, like Chile under Pinochet.
I’ve been to Venezuela four
or five times, including out into the countryside and up the Orinoco River.
It’s a great place. But you’ll have to live there for a while, and get
connected, in order not to make a mistake.
I first went to Venezuela
like 25 years ago. At the time, a mining boom was underway. But the Hugo Chávez
government basically stole everything, all the assets of the mining companies.
Now what’s left is vandalized, destroyed, and worth zero. Typical Third World
stuff.
That’s the problem with a
country like Venezuela. The usual suspects – socialists, populists, even common
criminals – get control of the government. Foreigners put money in, and the
government feels they can steal it with impunity – in the national interest, of
course. And they’re right. They can.
This is why development is
very hard in countries that don’t have a firm grasp of the basics of Western
civilization and the rule of law. I’m afraid Venezuela’s shown itself to be in
that class.
It’s also Indian country,
and the natives are getting restless. That’s true of most countries in Latin
America now. Indians feel they’ve been held down. They want to steal things
from people of European descent, take over, and run their countries the way the
Incas used to.
I’m not terribly optimistic
for Venezuela’s future. But it could still be a very interesting speculation.
As was Rhodesia in 1979.
My guess is that if you
could find a nice cattle ranch in the hands of the right owner, you could
probably buy 100,000 acres for $1 million. That would include whatever’s left
of the houses, barns, cattle, machinery, and what have you. If you’re in a
position to do that and defend your property, you could make a fortune. And
have the adventure of a lifetime. I kid you not.
Justin: Thanks for sharing
your thoughts with me today, Doug.
Doug: You’re welcome.
Norb Leahy, Dunwoody
GA Tea Party Leader
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