José Morales-Arilla: The sanctions talk

Added: 2026-05-21

[00:00:03]And we're live. So, going to set up Instagram. Just a sec as usual.

[00:00:12]Takes a bit. Okay, there it is. Okay.

[00:00:17]Okay. Um, so, uh, this stream we're going to do in English. Uh, this is another, um, episode of Friends of the Blog. Uh this time um I'm bringing in um Jose Morales Sarila uh who just co-authored a study with uh Miguel Santos, Miguel Anel Santos and Sined Partipo Cornels. Uh the name of the study uh which was published in published in Cambridge University Press is from collective punishment to constra constraints on authority. This is about sanctions. Um I'm going to read the first line of of the summary. Uh this element critically examines the claim that United States economic sanctions on Venezuela constituted uh collective punishment of the Venezuelan population contributing significantly to the country's economic collapse and humanitarian crisis. The study challenges uh this idea. So I'm bringing in Mono. I'm gonna talk Jose Morales Sarila aka Mcho and uh Hi Jose.

[00:01:28]>> Hey Ro, how are you man? Good to connect.

[00:01:32]>> Okay. Uh so uh as a means of a little bit of background uh between Jose and us. Um he's been around this is friends of the blog. So Jose is someone that has been around for a while. uh he he's been a uh he was an author uh of the blog sometime some time ago and he just like participated very actively in the community and now he's like a renowned uh economist and financial expert uh and um so um Joseo do you go by muncho or no >> I can go by mcho >> you can go by muncho for me a little bit more natural. So, >> more natural. No worries about that.

[00:02:19]>> If you don't mind, that's probably what's going to happen.

[00:02:23]Oh, uh first of all, um very important, uh if you're watching via YouTube, that's a best way to do it because we got live comments and we can punch them like this. Uh here's Ga uh saying, "Hi, Muncho, by the way." Um, so, uh, so it's best if you go to YouTube, but if you comment on Instagram, I can I I can bring in your questions and comments.

[00:02:52]So, again, uh, today we're going to talk about sanctions with Montro. um uh he just uh published a study in Cambridge University Press uh talking about sanctions and kind of um um in a way kind of like disproving uh the narrative of uh the general idea that um basically uh US sanctions destroy the Venezuelan economy. Um I just want to frame something for you uh um before we start.

[00:03:26]Um this is completely uh anecdotal. Um in 2019 uh I went to Karakas after being uh after not being able to go for a couple of years. Um and 2019 uh to remind um um the people that uh probably uh you know connected with with Venezuela after January 3rd. But uh 2017 and 2018 were were like the worst years uh for Venezuelans and for the Venezuelan economy. 2019 was a very strange year for Venezuelans. Uh it competes with 2026.

[00:04:10]Um, so 2019 was the year when uh we kicked off the year by having um I I think I think you're muted now, Raul.

[00:04:29]Uh, are you muted, Ro?

[00:04:36]>> Hold on.

[00:04:39]Now this is a typical technical difficulties.

[00:04:44]>> We're back. So uh to remind everyone uh 2019 uh we kicked off the year uh with um you know the president of the national assembly u swearing in as u um kind of interim president and the whole uh guido chapter uh started. Uh apart from that 2019 uh we got financial sanctions from Trump. Uh we had a a a um nationwide blackout that went on in several parts of the country for over four months. Uh we had like this kind of a an attempt of invasion by like 15 guys uh that was botched. Uh it was a you know it was a very eventful and complicated year. Um and suddenly um by the end of the year I I I suddenly arrive in Karakas uh in this you know sanctioned uh attacked by sanctioned blackout uh two governments running at the same time and all this disaster uh happening and suddenly uh by the end of 2019 um things in in Venezuela were strangely calm and there was a sense that uh the economy was sort of like I don't know um uh stab stabilizing a little bit uh and what I could see on the ground and I wrote about it in Karakas Chronicles uh was that uh what what what it was what what I couldn't see I I couldn't see the government anywhere it suddenly the government disappeared so uh uh they start the the they sort of u unofficially lifted uh some of the foreign exchange um uh regulations and you saw the dollar uh freely in in Karaka streets and uh the price controls uh also weren't being applied and not even taxation there weren't like the um tax authority completely disappeared as well And uh suddenly it's like the economy just started uh you know uh fixing itself.

[00:07:11]Uh so but then again that was the year of the sanctions the the year when like the financial the strong financial sanctions were >> the oil and of course we could see the impact uh on Pedesa uh the of kind of like the blockade uh there was like a a drop uh in production that was also very much tied to the blackout um And u and I know from the uh pedvesa perspective uh you know there was a lot happening uh but again in the streets um 2019 was very different to uh 2017 and 2018 and I don't know uh I never for me it was like completely anecdotal I I didn't have anything to explain this but then I saw what you published and I I felt that it sort of kind of explains it. So uh um you know why why don't you talk talk about uh the work that you did and kind of like also I would like to start start with the motivation um uh where where does the motivation to to uh dive into this come from? Obviously I know sanctions is a very um subject all very dear to us uh Venezuelans but in a very strange way.

[00:08:41]>> Yeah.

[00:08:43]>> Yeah. No, well, this this h this book that we just published with Cambridge University Press is co-authored with Miguelang Hel Santos, the dean of the school of government and public transportation here at the technological de Montter in Mexico City.

[00:09:01]uh and Sinadin Partipilo Cornel who's a predog at Harvard University and will be starting his PhD in Berkeley University in in UC Berkeley h in a few months and yeah so so basically the motivation uh to to pursue this research is kind of reacting to a to a prevalent narrative that had come about about sanctions under connection to to the collapse of the Venezuelan economy, right? Like you you could see papers written by Jeffrey Saxs who is like a you know first order development economist, you know, professor in Colombia University, founded the NP program in Harvard which I am a graduate of. you know, someone that you could look up to very much from an academic perspective and, you know, someone like him coming up with very aggressive numbers saying that the 2017 financial sanctions caused the death of 40,000 people in Venezuela and that the and in interviews saying like, you know, the collapse of the Venezuelan economy was completely man-made in Washington and you know, this was all a, you know, a consequence of imperial instruments of illegal sanctions and all of that. And you know that that that kind of rubbed us the wrong way because h we do you know you you if you if you take a look the broadest possible look at Venezuelan economic and and the social data you know without any you know sophistication in the econometrics or anything you just look at the data as it comes and then you see that you know you see the GDP data the GDP per capita data and you see that starting in 2013 it starts to collapse and by the time 2017 comes which is the day the the year where the first financial sanctions on the on the Venezuelan economy came about you know that that we many people have argued that these sanctions should not have had that big an effect because they were financial in nature and Venezuela already had effectively closed access to international financial markets both for the sovereign and for pedesa but but still these were these were the first like sanctions on the economy these were the first sanctions that were not individually targeted no so so by the time and this is the the whenever there's been research about the effects of sanctions in Venezuela usually what they're evaluating is the effect of the 2017 financial sanctions onward e so basically by the time that 2017 comes around uh over 50% of the drop in GDP between 2013 and 2023 had already happened and you don't see that the trend starts to worsen after 2017 it's effectively keeps the same trend and once 2019 comes with 2019 is the year of the oil sanctions the possibly more important economic sanctions on the Venezuelan economy what you start to see in the trend of the GDP per capita series is connected to what you felt when you travel to Venezuela, which is that the collapse stops and actually very quickly starts to have a mild recovery, very mild. We know it has been very unequal, but somewhat of a recovery. So, so then first pass at the data is completely inconsistent with this view that sanctions led to a collective punishment on the Venezuelan society that produced the collapse of the economy. That's that's not what comes across when you see the data at a very first pass. Not only that, but this this narrative of sanctions as collective punishment on Venezuela, you know, the the the way the logic works, the causal chain of that argument is that, you know, you impose sanctions because of that you have to your exports of oil are reduced. Because your exports of oil are reduced, then you cannot import essential food and medicines. And because of that then there's the collapse of the economy, the death and the migration as an outcome of the of the sanctions. No. So that's that's kind of the narrative of the thing. Well, >> but nothing of nothing of the sort was happening with the with the exports with the >> if you look at if you the argument goes that the collapse happened because there was a contraction in imports which was your access to necessary goods for production within the country. But if you look at the series of imports, that series had already by 2017 collapsed by more than 95% of the whole collapse between 2013 and 2023.

[00:14:06]And again in this case, it's even more stark because in 2017, the collapse of imports stops and after 2019 actually imports start to increase. So again, completely inconsistent with the view that that sanctions were the culprit of the Venezuelan economic collapse. If you look at, you know, in in those years, the the biggest years of the crisis that you described, you know, the big struggle in the country was to find 2,000 calories a day, right? Like it was an issue of nutrition and hunger, >> right? So if you look at undernourishment num numbers, undernourishment numbers were increasing all the way to 2017 and once you get to 2017 it stabilizes and once you go beyond 2019 which is the big oil sanctions actually under nourishment rates in the country starts to start to decrease. So uh however you look at it, this first pass as they at the at the this first very broad look at the data is completely inconsistent with the view that sanctions were the key cause or a key cause of the collapse of the Venezuelan economy and of the how do you say the and of the social consequence of that consequences of that economic collapse. So then you know there's these big economies making the point that it is the culprit but the first pass at look at looking at the data is completely inconsistent. So what the first thing that we do in in our analysis is that we go and look at the papers that have been written about this and we do you know I I think a thorough h literature review and we we essentially identify three key methodological problems in all papers in this literature. The first one is that you those those er methodologies or those contributions do not separate the effect of sanctions from worsening pre-trends that were happening before sanctions first happened. So so that that that everything that and there's a lot of things like no you see well after sanctions they worsen but but they were worsening already. So how do you separate from the from the trend and from the fact that the trend was worsening beforehand? So this is not something that you can cosally identify from just looking at the time series.

[00:16:38]you need to do something more sophisticated on the econometric side trying to >> and I think that I don't know if this is an example of that but but uh I I know that you mentioned it and and and obviously again it's like the kind of anecdotal thing that as you said in the beginning when you look at it from above it's kind of like clear because you see the timeline.

[00:17:03]Yeah. And within that timeline, one of the big things that that had an impact on the oil industry uh was the blackout.

[00:17:11]>> Yeah.

[00:17:12]>> And and and the blackout um you know, it's not uh you know, there's if you see the timeline, it's impossible that the sanctions caused the blackout.

[00:17:23]>> Correct.

[00:17:23]>> Uh this is something that came from before uh from like structural uh problems.

[00:17:29]>> Yeah. Lack of maintenance is the main thing that the experts in the electricity sector argue were the the culprit of the blackout. Yeah. No, I I agree. I think that that's the that's the third and potentially the most important objection to this literature that is that it does nothing to separate the fact that there are many concurrent treatments happening at the same time.

[00:17:52]So, how do you know that what's happening is a consequence of sanctions or of the blackouts which happened, you know, a month and a half after the oil sanctions of 2019 were enacted or of the constitutional crisis that the Wido crisis that led to the to the sanctions in in the first place or to the fact that the government militarized Pedvesa in late 2017.

[00:18:17]How do you or or the fact that the constituent broke down whatever you know glimpse of rule of law that remained before before 2017 because that's what triggered the sanctions right like the constituent. So so how do you separate how do you isolate the effect of one treatment from the other? These are all papers that do nothing about trying to separate one from the other. So they're very much not causally identified. So that's why in the paper we have a case study in which we look at oil production not monthly, not yearly, daily, the day before and the day after the blackouts which were happening after the sanctions and the day of the blackouts the production essentially almost goes to zero and this effect is greatest in oil fields that depend on electric pumping of steam so that oil can flow. These are not the effects are not seen as directly in fields that you know oil flows because of the associated gas in the in the in the the well. So so this is clearly an identified a well identified causal effect of the blackouts on oil production that happen and the blackouts happened after the sanctions. So if you have a paper that says that, oh look, oil production dropped after sanctions and you impute that to be the consequence of sanctions, you're you're incurring in a fallacy. That's a logical fallacy of saying, you know, I think the name of the fallacy is post hawk eropter hawk, right? Like just because something happened after an event doesn't mean that that other thing that happened after the event is the consequence of that event.

[00:19:55]>> Yeah. And that's a that and that's a fallacy that that this literature engages in massively massively.

[00:20:03]So so we do a we do a bunch of original analysis. H one of the things that we that we do and we are actually we have a working paper that extends the analysis that we present in the book. um basically makes the point that you know that these 2017 sanctions these are the main sanctions that people focus on in this literature and as I was saying these were likely to be very unconsequential because Venezuela already didn't have access to the to the financial markets. So you're like closing a door on something that I was not entering. You said 2017. Uh we're talking about the 2019 or >> no right now. Right now there's a there's a case study that we performed on the 2017 sanctions.

[00:20:48]>> Oh okay. Okay.

[00:20:48]>> So we because most of the papers that have been written about this are about 2017 actually not 2018.

[00:20:56]>> So so we look at the 2017 sanctions which we believe shouldn't be too meaningful because of because financial markets were already closed to Venezuela. Erh, but importantly, these were not oil sanctions. After the 2017 financial sanctions, Venezuela could still sell oil to the US at market prices, >> right? So, so if this eroded the Venezuelan economy in the way the causal chain in that literature seems to suggest, it must be because it produced a contraction in oil production in the quantities.

[00:21:31]You know, the exports are quantities by price. If this mattered is because it affected the quantities and if it's affecting the quantities, if it's affecting oil production, it must have had disproportionally affected local economic outcomes in oil producing regions.

[00:21:49]Right? So that's what we evaluate. So we evaluate whether after the 2017 sanctions the collapse of oil producing regions accelerated visav the collapse that was observed in non- oil producing regions and we which is you know a first order expectation if these sanctions were having a huge effect on the economy we see nothing like that. So we basically look at you know food sales. The collapse in food sales is parallel in oil producing and non- oil producing regions.

[00:22:25]>> Okay.

[00:22:25]>> We look at nighttime lights which is a measure of local economic development.

[00:22:30]The collapsing nighttime lights is parallel in oil producing versus non-oil producing regions. We look at electoral turnout. You might think well if migration if people are leaving they're less likely to turn out in elections after the sanctions. We don't see the collapsing turnout to be stronger in oil producing regions or not. Recently we got data from Colombia in which we can see month by month Venezuelans entering Colombia by municipality of origin. So now we can measure migration between at different moments in time between oil producing regions and non- oil producing regions. We don't see an effect. the rate of migration from oil producing regions and non oil producing regions after the sanctions the collapse is the same or the increase in migration is the same. So, so there's no way in which you look at data about meaningful economic outcomes in oil producing areas and non- oil producing areas that delivers a result that is consistent with the first order expectation of the collective punishment narrative which is that you're constraining all production disproportionately and that later has an effect on the rest of the economy because you have lower lower exports or whatever. So, so again no evidence consistent with the first order expectation. H we look at we look at essential imports for instance the the one of the problems in this literature is that they it only focuses on oil production and then makes this cosal chain all the way to imports and death and migration but then you don't look at the downstream economic outcomes. Right?

[00:24:07]>> So the the intermediary outcome in this logic is that you collapse the the there was an import collapse, right? Like that's the logic. So because import then you we couldn't eat and people had to leave or people died. No.

[00:24:20]>> If you look at essential imports food and medicine >> right like the whole collapse of imports of food and medicine was pre 2017.

[00:24:30]If you do some more fancy econometrics with a synthetic control method in which you find a set of countries that predicted best what was happening to Venezuelan imports before sanctions.

[00:24:41]Again, everything happened before the sanctions. So even if you just look at the data or you do the fancy econometrics, the conclusion is confirmed that the collapse is prior to sanctions. So there's no way in which you can say no the treatment is the moment of sanctions. Now the collapse starts. That's not how that's not what it what happens. So, so there's no way in which you can justify, right? Like that causal chain, that causal chain breaks down in that intermediate step of imports. It's impossible to explain what happened to Venezuela through collapsing imports when the collapse the whole collapsing imports happened before the sanctions ever ever occur.

[00:25:21]>> Well, one one good thing about this is that we've been writing about it for a while. Um again uh very much uh anecdotal and with the one one of the big problems as you know with Venezuela is that there's little data uh official data available and you have to be very creative uh to get information but uh this is going to be very helpful. Thanks for giving us a work to site. Ah no absolutely >> we talk about this uh but uh you spoke uh about what you didn't find and now I would like to talk a little bit about what you did find like uh >> uh what what was the actual um effect of the sanctions?

[00:26:05]>> Yeah. So, so, so this first part of the book and this analysis and case studies and stuff and the literature review basically confirm that the evidence is inconsistent with the narrative of sanctions as collective punishment, right? That sanctions led to the collapse of the Venezuelan economy.

[00:26:28]So, okay, you you might you could stop there. You could say, okay, the evidence suggests that sanctions didn't have an effect or or or did not lead to the collapse of the economy. You could stop there, but again, that's kind of insatisfactory because of what you just said at the very beginning, right? Like things actually calmed down and started to moderately improve after sanctions first came about. And if you look at the you know emographic record what Maduro said at the time what many people said at the time it's like we're liberalizing the economy we're you know finalizing the com and putting an end to the Kadivi saga for the longest time right like we are stopping price control enforcement we're essentially liberalizing the economy in response to sanctions Maduro said it right like we have a quote within the p within the book that that that that that shows it. There there was a recent interview to Anatoli, the the correspondent of the New York Times in Venezuela.

[00:27:34]>> He was being interviewed in the daily, which is the the daily podcast of the of the New York Times.

[00:27:40]>> And basically, he spells it out, right?

[00:27:42]Like it's like when when Chavez dies, Maduro, you know, doubles down on the economic policies that brought the the country to its economic knees. And that's worsens everything and leads to the collapse to a full collapse.

[00:27:55]And then Trump comes over, imposes sanctions, and in response to sanctions, he needs to fix the economy, right? And then the liberalization happens. So, so, so, so kind of kind of what you felt when you traveled, everybody that or most people that have been paying attention to the Venezuelan situation understand that that's what happened, right? like that that sanctions if if they had an effect was by forcing the regime through a political economy channel to completely transform the economy the the scaffolding of economic regulations that had led the country to where it was to to the collapse right. So, so we were thinking, okay, we we could say that as an alternative story, right, to the to the to the collective punishment. An alternative story to the collective punishment e story is a story of welfare enhancing sanction proofing strategies, right? You received a sanction, you want to do something in response to the sanction. You want to sanction proof your economy.

[00:29:07]And what you do to sanction proof your economy is to liberalize it. And the result of that sanction proofing strategy is to actually make things better off for the people even how they were before the sanctions were first enacted in the first place. Right? So that story is a story. That's a story but that story is way more consistent with the broadest look at the macro data.

[00:29:32]>> Yeah.

[00:29:33]>> Right. Like that's that's consistent with the broad strokes of what happened.

[00:29:36]So we were thinking okay if if this was what h was happening what should we observe in data and you know we know that one of the ways through which chavismo essentially sacked Venezuela was by enabling overpriced imports through incentivized by the subsidization of foreign exchange.

[00:30:04]Right? So, so you know, Eluto Andrade confesses to having received over a billion dollars in bribes for guaranteed access to subsidized currency. And a billion dollar in bribes is more than the bribes that Marcelo de Br confessed to having given in the Lavaj scandal, which is the biggest corruption scandal in Latin American history. Right? So, so this thing is first order, right? like this this this problem of overpricing imports in to in order to extract value out of the currency subsidization. So you you buy at 10, you sell at 10,000 and you become a millionaire in a in a you know in a day and someone within the government is you know getting a bribe so that you get some so that you get access to that arbitrage opportunity guaranteed.

[00:30:59]So we get to measure the arbitrage. For instance, we go to Colombian export data and we see the same firm the same firm exporting the same product on the same quarter to an importer in anywhere else in the world and an importer in Venezuela.

[00:31:20]If on average that difference of the price in other countries versus Venezuela is higher, Venezuela is paying more for the same good from the same firm, then that's a measurement of overpriced imports, right? Okay. So we basically present the a yearly series of the overpricing of Venezuelan imports from Colombia and we see that to be zero before Kadivi starts in 2003. After Kadivi starts, it starts increasing and Venezuela is paying on average an overpric to 30%.

[00:31:58]Then Maduro comes in and Maduro comes in and doubles down.

[00:32:02]>> And after Maduro doubles down, that average number grows all the way to 100%. Right? Like at a moment where 70% of Venezuelans were losing weight involuntarily according to the 2017 and Kovi survey at that moment at that moment Venezuela was paying twice for the same potato that Colombia was exporting to other countries at half the price.

[00:32:27]And that was all incentivized by the foreign exchange the the foreign exchange system that we have that that value is that value of the overpricing is maximized in 2016 after 2017 which is after the first initial revisions in response to sanctions that value starts to drop in 2018 already lower. it goes to zero in 2019 and the sanctions of 2019 were January 2019.

[00:32:59]Right? So, so these results show that you're removing a massive inefficiency that was there for corruption purpose for for rent extraction purposes. That rent extraction device, which we know was massive, goes to zero after the sanctions. That's yet another piece of evidence that favors the view that things started to improve because you liberalized the economy and by doing so you were closing rents that before we're going to regime insiders. So h so we're we're we're now in in separate work that I'm developing. I'm trying to come to explain the political economy logic of why you would do that in a moment like 201 17 to 19.

[00:33:43]Uh sorry in a moment like 2017 to >> 2017 2019 which is the period in which you started to h decouple the system of foreign exchange controls and price controls and all of that right like >> the interesting thing here is that you're talking about this is one example like one element of the um beyond the inefficiencies of the system. Um well then you can talk about you know what happened in Pereesa which uh of course there's >> there's also like a a whole um I was talking to a friend the other day we should start a series called something like the 100year audit because that's what it's going to take to sort of like dig in and understand uh and have a a little bit of detail on our on everything that went But uh for instance, corruption in Pedesa one which is one detail uh how how the the the PESA funds that were supposed to be reinvested went elsewhere. Uh but I I I always remember also like the veracity of of the military uh in in the oil industry. Uh I used to work uh in I did oil industry related work and I remember uh some uh people from oil services companies telling us you know uh commissions used to be 5% you know what we had to pay to get like done >> and in less than a year they went up to 25%.

[00:35:29]>> And three years later it was 70%. and then it was over 100%.

[00:35:36]So, uh you're talking about one element, but it's there's like a whole universe >> of things that they did uh early on even, you know, from the time that Chavez was there uh and they were already in the system. It's like why you know suddenly the the uh the electric grid fails but the electric grid failed because of uh uninvestment uh because of corruption because of uh many many things that happened and that had been happening for over a decade.

[00:36:11]>> Yeah. Yeah. I mean you you drive out of Karakas towards the east and you see the pillars of the train that was never built. No, it's like a a monument to corruption.

[00:36:22]No. So, so it's like the the you know the the Chavista corruption is on a league of its own, right? like it's like you know I I I I sometimes tell this story the the Andra story to my to my friends that work on corruption in for academic purposes and you know it's like they think like you're you got to be kidding right like it's like you you this this is silly h but it is true right like it's like one person received in bribes more bribes than the bribes that were paid by Marcelo de that Marcelo de confessed to paying right like Marcelo the the labato stuff right like the former president of Peru committed suicide. Ministers went to jail, right? Like this was a huge scandal everywhere in the world. By the way, Marcelo de Br where he confessed to having paid the highest amount of bribes was in Venezuela. But even if you don't account for that, Andrade got more bribes one person, right? So >> in Venezuela and and as you said, it was a scandal everywhere but in Venezuela.

[00:37:27]It was a scandal everywhere but in Venezuela. Yeah. In in Venezuela it was a mini scandal because some opposition figures were connected to it. Right. So it only splashes when when it's not against them right which is >> super interesting in the way they they manage public you know social media and communications and narratives in Venezuela. That's another very interesting topic of analysis. By the way, this result of the overpricing, we were doing it with Colombian export data at the transaction level because of availability issues, but we've been able to find transaction level data from Venezuela, from from from a a firm that collects this information comparably across countries. And you also see it, right? Like if you look not at Colombian exports to Venezuela or abroad, but Venezuelan imports versus Colombian imports from the same country of origin of the same product the same year and then you see the exact same pattern, right? right? Like it's like there's an overpricing pattern >> h that starts to collapse after 2016 and essentially goes to zero or even negative sometimes depending on the specification after after 2019 which is to me >> it's like a it's to to me that feels like a like a how do you say the the smoking gun of of huge reduction in an inefficiency as a result of the policies that were being implemented >> according to Maduro himself as a sanction proving response to the sanctions of Trump in 200.

[00:38:59]>> Yes. And and I I would connect that and I think that it's very interesting that well um you know uh you can draw a a perfect parallel to what's happening right now. Um and it it's very clear how uh the Maduro government they had the the finger in the they were pushing the doomsday button basically. uh and and and they had the power uh to uh as you said eliminate all these inefficiencies in the system whenever they wanted to do it just like now. The thing is that they didn't want to do it and they were forced back then as they are being forced right now to uh of course the tone that they're using right now is that yeah we're doing this for the country but you know right now because of a military threat right like that the nature of brain on their authority is different but what drove them to change stack is the constraint under authority initially economic and now not economic but on this other on this other realm >> erh something that to me super telling as well you know well there's this Malpa Malpa scandal that just happened recently right like that >> yeah Malpa Flores >> Malpa Flores right like the the basically when they started to feel a bit more unsta more more stable right like 2023 when they started to feel a bit more stable essentially They recreated the kado.

[00:40:40]They recreated Kadibo for their friend which is like you know themselves but but it's like no no no okay you are going to commercialize our oil but you buy it to us you buy it from us at the in Bolivares at the subsidized rate and then you sell it in dollars in the market and it's like we're back to Kadib right like as soon as you get some some breathing room right like as soon as they start to put together the so so So, so yeah. So, so that to me also talks about the possibilities of true, you know, recovery of the Venezuelan economy in the long term uh without reinstitutionalization and, you know, without an without a democratic transition that actually removes these guys that put together the system and that want to come back to that system as soon as they get the chance.

[00:41:32]>> Yeah.

[00:41:32]>> Erh, but after that full reinstitutionalization so that this cannot happen ever again. Er, I I cannot imagine a true recovery for Venezuela in the long term that does not go through those urgent and >> all the disaster because uh uh also uh effects of the sanctions. There's also the things that they do because of the sanctions but again it's like blaming uh the the victim of rape because of wearing a a short skirt. Yeah. But but you got like okay uh they have to build a system to to circumvent sanctions and they do it but within that system they steal the money and there's no money in and and it's a mess but >> and what they did initially and what they did initially to circumvent the consequences of the sanctions was well for improving liberalizing was good for the people right like liberalizing was good for the for for the citizens. H but that's not they don't do it because it's good for the citizens. They do it because it was a way to diffuse the pressure that they were facing at that moment in 2017 2019 with protest, repression, h you know constitutional crisis, recognition of Wido and all of that. They were able to diffuse the protest and diffuse the tension by just giving the middle class some breathing room. And that led to an economic recovery that somehow reached a little bit to everyone. Uh but as soon as those pressures and those constraints were not there, they started to look at ways to reimpose systems for their direct extraction. And this is the Malpa Florida stuff. And the fact that now suddenly again at some point we started to have a you know a BV and a parent market and now there's a gap again, right? like it's not the gaps that we saw in 2016, but now there's a gap again. And in that gap, if you get to buy at this rate and sell at this rate, you know, you're done. You're golden.

[00:43:43]So yeah, it's it's like they should not have the authority to be able to do that. But that will not happen unless they leave and that will not happen unless there's full reinstitutionalization so that no one in the future can do it.

[00:43:57]So uh can we say that um sanctions birthed the Venezuela cereo economy?

[00:44:05]>> Yeah. It's like to what degree is the pax bodeica a consequence of sanctions?

[00:44:10]>> Exactly.

[00:44:12]>> So so that's that's a story that's a narrative. that narrative is consistent with the macro view of the data in a way that the that the that the you know collective punishment narrative is not is inconsistent with the macro view of the data and it's consistent with this analysis it is consistent with what Maduro said himself it is consistent with what journalists and observers of the Venezuelan economy have said right like the anati point that I was making earlier and it is consistent with the fact that These massive inefficiencies that were put in place for extraction by regime insiders were completely decoupled in the advent of sanctions >> through the alleged sanction proofing strategy which was liberalizing the economy. Alleged by them, right? Like they are saying that they liberalized in response to the economic war and sanctions and all of that. So, so my opinion is that yes, that that is the case and and that's the kind of the point that we're trying to convey in the in the book, right? That that interpretation of of the events is consistent with everything. So, it's way more likely to be the explanation.

[00:45:31]If sanctions had an effect on the economy, that's the way more likely explanation of how than the collective sanction narrative that would lead to a bunch of predictions that do not come across in the data at all. That's that's kind of a point.

[00:45:47]>> Well, uh on that conclusion, Muncho, I think that uh I have stolen enough of your time.

[00:45:55]>> No, we have to talk about these things.

[00:45:57]I get I get it. Um, from collective punishment to constraints on authority uh by Miguel Santos, Jose Morales and Sined Partipo Cornel.

[00:46:08]>> Cornel he's also Venezuelan.

[00:46:12]>> Yeah. Cornelo.

[00:46:14]>> Yeah.

[00:46:16]>> Almost. He I think he's from I think he's from I think.

[00:46:20]>> Ah.

[00:46:22]Okay.

[00:46:24]Pyano. Um, so, uh, well, the you you have the link on your Twitter. Um, you can find, uh, Jose Morales Aila aka Muncho on Twitter, Donas. Where else?

[00:46:40]>> Well, in Twitter is Aroa Jose Morales A.

[00:46:45]And that's basically and well, in my website, my website is Jose Morales.com.

[00:46:51]And that >> I'm going to leave the link in the description on YouTube. So again as usual I invite you all to go into our our YouTube account which >> after 10 years we actually activate it and you know uh subscribe so you get uh so you get a notification whenever we we start the live stream.

[00:47:13]>> Yeah. again. Thank you so much.

[00:47:16]>> By the way, the the book is open access.

[00:47:19]So, you know, you can buy it if you want a physical copy, but you can download it and and read it electronically directly from the link. So, that will show up in my in my in my Twitter account. So, yeah.

[00:47:31]>> Okay. And we're going to drop it in the description as well. So again, Mo, thank you so much and I hope you to have you um on Friends of of the Blog again soon to you know another.

[00:47:46]All righty, Raul, thank you so much for the invitation.

[00:47:48]>> I'm gonna end the live stream. Yeah.

[00:47:50]Bye.