My understanding is that what is driving the interest in cryptocurrencies is a combination of an attempt to find an alternative store of value, separate from Venezuela’s domestic currency, and dirt cheap prices for electricity that makes mining for [cryptocurrencies] competitive with other jurisdictions around the world. Venezuela’s money supply doubled between March 2016 and March 2017, and the inevitable consequence of this is very high inflation, estimated at 800 percent in 2016. Access to traditional stores of value such as dollars and gold is highly restricted by the government, forcing the average person to go to the black market to purchase these, where Venezuela’s currency has been depreciating against the dollar at a staggering rate. In addition, Venezuela’s highly distorted economy, in which energy is so highly subsidized that it is practically free, makes it competitive for [cryptocurrency] miners to operate. The [cryptocurrencies] generated can be used to purchase scarce goods abroad for shipment to Venezuela. Keep in mind that not only is food scarce enough that malnutrition is a serious problem for the first time in decades, but most medicines are unavailable due to severe import restrictions by the government. So Venezuela is uniquely economically mismanaged compared to other South American countries, which together with highly subsidized electricity makes [cryptocurrencies] one of the possible lifelines for some Venezuelans who have the savvy to enter this market. This is not a combination that you are likely to see repeated elsewhere in the region.
There’s a real sense the U.S.-Latin American relationship had been a bit distant and now has new possibilities. The one thing that could spoil that is the situation in Venezuela, so the administration is looking for ways to manage that.
China would do well to examine the experiences of previous international investors for lessons, good and bad, and consider adopting corporate social responsibility practices that meet global [environmental] standards. This will help to minimize friction over Chinese investments in [Latin America].
There’s a lot of distrust among opposition voters on the fairness of the vote [in Venezuela], given the overwhelming presence of government in the media and the resources they can devote to campaigning, compared to the opposition. On the other hand, the government has to worry about abstention on its side because its level of popular support is quite low.
Latin America already has two major regional development banks, the Inter-American Development Bank and the Corporación Andina de Fomento, and most countries can also borrow from international capital markets, so joining [the Asian Infrastructure Investment Bank] does not appear to be as urgent as it may be to other founding members.
The [Venezuelan] military has become heavily involved in the distribution of food and goods outside the big cities; they control the border. This gives them a lot of say about what’s going on in the country, but also creates a lot of opportunities for corruption.
A national security threat from Venezuela is required for Obama to impose the sanctions. This language is derived from the International Emergency Economic Powers Act. Without using those specific statements, President Obama cannot use this Act.
The reconciliation between Cuba and Miami-based Cubans has largely proceeded along generational lines. Younger Cuban-Americans and more recent Cuban arrivals are less likely to favour strict U.S. policies against Cuba.