Venezuela is the only country in the world that's more fucked up than North Korea.

Wall Street Journal - The Tragedy of Venezuela

When reporter Anatoly Kurmanaev started covering the country five years ago, the petrodollar-fueled party was still raging, but the greed and incompetence of the Socialist government soon began to take their devastating toll.

By Anatoly Kurmanaev May 24, 2018 313 COMMENTS

Last weekend, Venezuela’s President Nicolás Maduro dragged his Socialist government into a third decade in power by winning elections that were boycotted by the opposition, ignored by most of his countrymen and rejected by the international community. As sluggish voting drew to a close, a smiling and confident Mr. Maduro posted a video of himself waving not to throngs of adoring supporters but to a largely empty public square. It was a fitting metaphor for the five years I have spent reporting from the country, now at an end as I begin another assignment.

When I arrived in Venezuela in 2013, the party was still on. Oil was fetching $100 a barrel, and Mr. Maduro’s populist government was showering petrodollars on everyone. The Caracas skyline was dotted with grandiose construction projects, steakhouses were buying vintage Scotch by the container load and hotels had to be reserved weeks in advance.

But there were worrisome signs of what was to come. Inflation and debt were rising fast. And despite the spending splurge, the economy was only growing at a rate of 1.3%. Shortages were getting worse, as fewer and fewer people made or grew anything, preferring instead to make money by playing the exchange rate arbitrage created by the government’s labyrinthine currency controls.

None of it stopped the revelry. The alarming economic indicators were the equivalent of a neighbor complaining about the noise at a party but not having anyone to call because the blowout was hosted by the cops themselves. That party ended in the worst economic hangover the world has seen in a half-century: One of the world’s great oil producers obliterated by the sheer greed and incompetence of a ruling party hiding beneath a veneer of Socialist ideology.

Growing up in provincial Russia in the 1990s, I lived through the collapse of a superpower and witnessed the corruption, violence and degradation that followed. I thought I had the street smarts to navigate Venezuela’s maddening Socialist bureaucracy and controls, while enjoying much nicer weather.

What struck me on arriving was how little the Socialist leaders cared about even the appearances of equality. They showed up at press conferences in shantytowns in motorcades of brand new armored SUVs. They toured tumbledown factories on live state TV wearing Rolexes and carrying Chanel handbags. They shuttled journalists to decaying state-run oil fields on private jets with gilded toilet paper dispensers.

I got a taste of how the country’s rulers liked to live during my first assignment. It didn’t sound particularly promising: an event sponsored by the Central Bank of Venezuela to celebrate a local patron saint. I expected to be regaled with offhand inflation stats and the government’s plans for getting the country’s economic house in order. I showed up in a blazer and flannel slacks at the bank’s imposing modernist headquarters only to be shoved into the back of a commandeered ambulance with other reporters.

Sirens blazing, we snaked through the solid traffic of Caracas weekenders blasting reggaeton from their car windows. We descended through the emerald-colored mountains to the Caribbean hometown of the bank’s then-president, Nelson Merentes, where a beach party was in full tilt. Any lingering expectation of discussing monetary policy evaporated when the ambulance doors opened and a boy of about 8 in flip flops handed me a bottle of beer. It was 10 a.m.

In a nearby square, I found Mr. Merentes, a pudgy Hungarian-trained mathematician who was 59 years old at the time and ran the Venezuelan economy for a decade, waving maracas and dancing with a bevy of young women in tight denim shorts. It was the annual feast of his native village, and we were quickly submerged in the primal beat of dozens of giant tambourines beaten in unison.

The whole town spilled out on the streets for a disorienting, sweltering party. Everyone was drinking, dancing and laughing. Bottles of vintage scotch and Grey Goose, brought by the bank’s entourage, were circulating along with plastic bottles of cheap rum mixed with the creamy white tropical juice drunk by the locals.

It was the last year Venezuela’s economy would grow. By the end of 2018, it will have shrunk by an estimated 35% since 2013, the steepest contraction in the country’s 200-year history and the deepest recession anywhere in the world in decades. From 2014 to 2017, the poverty rate rose from 48% to 87%, according to a survey by the country’s top universities. Some nine out of 10 Venezuelans don’t earn enough to meet basic needs. Children die from malnutrition and medicine shortages. An estimated three million Venezuelans, 10% of the population, have left the country in the two decades of Socialist rule, almost half of them in the past two years, according to Tomás Páez, a researcher at the Central University of Venezuela.

Today, the streets of Naiguatá, the coastal town that hosted the central bank party, are largely empty, like those in the rest of Venezuela. Its once popular beach is littered with garbage and empty, even on weekends. The stalls that sold rum cocktails and fried corn pastries are closed.

The speed of the collapse has transformed the lives of millions of Venezuelans almost overnight. When I met social worker Jacqueline Zuñiga in the port city of La Guaira shortly after arriving, she had recently bought an apartment, had plastic surgery and taken a cruise ship to visit her parents’ native Colombia. She soon bought her first car. Her ticket out of one of Caracas’s worst slums had been joining the ruling Socialist Party and becoming a key party activist in La Guaira, organizing women’s cooperatives. Her new lifestyle had been made possible by subsidized loans and preferential exchange rates.

Today, Ms. Zuñiga is struggling to feed her family three meals a day. Her car is rusting away because of a lack of spare parts. The seaside restaurant where I used to meet her to discuss politics is closed.

If Mr. Maduro didn’t know when to stop the music, the idea for the endless party came from his predecessor, Hugo Chávez, who died just a month before I arrived in 2013. The strongman charmed his countrymen with a silver tongue, his love of dancing and singing and his disdain for the hated austerity packages imposed by previous Venezuelan presidents. As oil prices shot up in his last decade, Mr. Chavez not only failed to save any of the windfall but buried the country in debt.

Along the way, he imposed capital controls to try to stop money from fleeing the country. The arbitrary exchange rate system suffocated private enterprise and investment, but the poor got subsidized food and free housing. The middle class got up to $8,000 of almost-free credit card allowances a year for travel and shopping. And the rich and politically connected siphoned off up to $30 billion a year of heavily subsidized dollars through shell companies, according to the planning minister at the time.

The currency and price controls implemented by Mr. Chávez broke the basic link between supply and demand, creating surreal economic distortions. A business-class Air France return ticket from Caracas to my hometown in Siberia would cost me $400, yet a 15-year-old Suzuki jalopy with no air conditioning and 150,000 miles set me back $4,600.

Caracas in 2013 reminded me of a tropical version of the Soviet periphery. Basic goods like flour and aspirin had fixed prices and were so cheap that companies had no incentive to make them. When you did find them, it made sense to grab as much as you could carry. Who knew when you would find them again? Like Russia in the 1980s, people dealt with shortages by resorting to the black market, hoarding goods and trading perks of their jobs, like bureaucratic stamps of approval or access to car batteries, for other favors or products.

One time a friend offered me “one thousand toilet papers,” which I figured was a good opportunity to stock up and help friends. But instead of the thousand rolls I expected, a truck showed up and tried to unload 1,000 bales of toilet paper, or 44,000 rolls, at my tiny office in a busy shopping center.

But Venezuela’s collapse has been far worse than the chaos that I experienced in the post-Soviet meltdown. As a young person, I was still able to get a good education in a public school with subsidized meals and decent free hospital treatment. By contrast, as the recession took hold in Venezuela, the so-called Socialist government made no attempt to shield health care and education, the two supposed pillars of its program. This wasn’t Socialism. It was kleptocracy—the rule of thieves.

In Venezuela, I saw children abandon schools that had stopped serving meals and teachers trade their lesson books for pickaxes to work in dangerous mines. I saw pictures of horse carcasses on the grounds of the top university’s veterinary school—killed and eaten because of the lack of food.

Lately, it seems that even Mr. Maduro has given up on the Socialist pretense, chucking leftist slogans in favor of straightforward clientelism: Vote for me, and you’ll get a food handout. The red flags and shirts of Mr. Chavez’s heyday have largely disappeared from state television, and the ruling Socialist Party is being supplanted by Mr. Maduro’s new, anodyne-sounding political movement, We Are Venezuela.

Venezuelans have responded to the economic crisis with a mixture of dignity and resignation. It has been stirring to see men and women go to great lengths to maintain a neat personal appearance despite constant water cuts, a shortage of toiletries and pauper wages. Workers patiently spend hours in line at ATMs to get a few notes of nearly worthless bills to pay a cash-only bus fare home, only to return to the queue the next day.

One day, I saw an emaciated middle-aged construction worker on a beat-up moped pull up to a kid who was rummaging through a garbage sack on the street. The man said, ‘Young man!’ in a raspy working-class accent, opened his fraying backpack, took out the only thing there—a plastic container of pasta and beans—and handed it to the kid. It was likely the only thing the construction worker himself had to eat for dinner.

Hyperinflation, set to reach 14,000% this year, has transformed the most basic transactions into Kafkaesque trials. Cash is extremely scarce, card payment networks are overloaded, cell phone coverage is worse than in Syria, and online banking systems constantly crash because of underinvestment. Paying for a cup of coffee can take an hour.

Assignments in the country’s interior required traveling with a duffel bag of cash, worth millions of dollars at the official exchange rate but just $100 at the informal rate actually in use. At the constant checkpoints and inspections along the way, it was up to each officer to decide whether my cash was pocket money or an undeclared fortune punishable with prison.

Then there is the country’s skyrocketing crime rate. Most of my acquaintances report having had a gun pointed at them at some point or a relative kidnapped for ransom. I got off lucky with a robbery in my hotel room while I slept one night.

Caracas has long been a dangerous yet vibrant city, but the crisis has transformed it into a zombie movie set. When I moved into my neighborhood of Chacao, in the eastern part of the city, the streets were full of food stalls, cafes and shops run by Portuguese, Italian and Syrian immigrants. Groups of young and old stayed in the streets drinking beer or chatting into the small hours.

But Chacao’s streets are now empty after dark. Most of the streetlights no longer work, and the only people outside after 8 p.m. are homeless kids rummaging through garbage bags.

The crisis has even made it harder for the ruling elite to enjoy its privileged status. Despite access to official dollars and the protection of security details, top apparatchiks now avoid the best restaurants, the plushest resorts and business-class lounges, where they fear encountering the hatred of their compatriots. Sanctions and fears of corruption probes have barred many of them from trips to the U.S. and much of Europe.

After 2016, I no longer had to travel to report on the toll of the economic crisis. It was visible all around me: in the sagging skin of neighbors, the dimming eyes of janitors and security guards, the children’s scuffles for mangos from a nearby tree. It is profoundly depressing to watch people you know grow thinner and more dejected day by day, year after year. When I look back at my five years in Venezuela, it’s not the time I spent covering riots, violent street protests or armed gangs that stirs the most feeling. It’s the slow decay of the people I encountered every day.

For most ordinary Venezuelans I know, Mr. Maduro’s foreordained victory last weekend snuffed out the last glimmer of hope that their lives can improve through democratic and peaceful means. What’s left is exile or further misery.

Appeared in the May 26, 2018, print edition.

In front of a portrait of his predecessor, Hugo Chávez, Venezuelan President Nicolás Maduro speaks at the January 2017 installation of an ‘anti-coup command,’ intended to thwart opposition efforts to unseat him.

Extreme poverty in Venezuela has risen so steeply that it has become common to see people searching for food residues in garbage, like here in the capital, Caracas, in November 2017.