No Arrivals: The Visible Isolation of Caracas
The Simon Bolivar International Airport in Caracas has become, perhaps, the most isolated capital city airport in the Western Hemisphere, taking the contemptible honor away from Havana. In June, Aeroméxico added its name to the list of airlines no longer providing service to Venezuela. The airline cited difficulty in repatriating profits as a reason for suspending service to the country. Many other foreign companies invested in Venezuela share similar problems as Aeroméxico. The consequences of these problems are shouldered by Venezuelans who lack access to things they need and live in a country that’s more and more isolated each day. The current situation at the Caracas Airport is a noticeable symptom of this isolation.
Under the leadership of Hugo Chávez and his successor, Nicolás Maduro, Venezuela’s largest airport has struggled and flights in and out of the country have substantially decreased. Air Canada, Alitalia, LAN Chile and Lufthansa no longer provide service to the country. On a recent Friday there were fewer than 80 flights out of Caracas, of which only 26 were for destinations abroad. Of these only four were to the United States (Houston and Miami) and three to major cities in Europe. In contrast, over 200 flights departed from Bogotá’s El Dorado airport on that same Friday (81 flights between noon and 3pm alone). The airport’s decline is a result of two things that affect the daily lives of Venezuelans far beyond air travel: exchange controls and despondent foreign policy.
Exchange controls in place since the beginning of Chavez’s administration have caused problems for foreign airlines operating in and out of Venezuela, which now hold $4.1 billion in local currency that they cannot get out of the country, according to the International Air Transport Association. A complicated exchange regime in place since 2003 (which has changed many times) determines who has access to foreign currency and at what rate. Priority is given to businesses that want to import items deemed by the government as “necessary” goods such as food and medicine. As Venezuela’s reserves run low, however, partly as a result of the low price of oil, fewer and fewer companies have access to foreign currency like US dollars.
Foreign companies operating in Venezuela – not only airlines but also manufacturers of common products from food and medicine to automobiles – have a difficult time repatriating profits, as the government blocks access to the dollars they need to send back to their headquarters and to source materials. Faced with this growing problem, some companies like Clorox, Kimberly-Clark, General Mills and a host of others have, like the airlines, left the country. Others, like Coca-Cola, remain in Venezuela even when they are unable to continue production because they lack access to key inputs.
Companies that elect to stay in Venezuela face currency problems and the risk of their funds being expropriated by the government. Companies that close down operations abandon big investments in infrastructure and human capital made during economic booms, and sacrifice a market position that could be valuable if boom times return to Venezuela. For airlines, the decision to suspend operations in Venezuela is much easier than for other businesses. The fixed investment that airlines make in a destination country is minimal compared to that of manufacturing companies. Consider for example how quickly US airlines will be able to resume travel to Cuba. Commercial US flights to Cuba, suspended for over 50 years, are set to start again on September 7, 2016, just five months after President Obama visited Cuba and announced the change in policy. Airlines that have suspended service to Caracas could, in theory, act just as quickly to resume service to Venezuela if conditions in the country improve.
The diplomatic whims of the government have also isolated the country dramatically. President Maduro has closed a number of points along the Colombian-Venezuelan border, severely restricting trade between the two partners. He recalled the Venezuelan Ambassador to Brazil over Roussef’s impeachment in May and the Ambassador to Guyana over a border dispute. Similarly, he ordered back the Ambassador of Panama after he accused the country of being a “lackey” of the US. Conversely, Spain recalled its Ambassador citing insults from Maduro. The US and Venezuela haven’t had stable diplomatic representation since they expelled each other’s Ambassadors in 2008. The effects of these actions are felt on everything from visa restrictions to new trading patterns to, of course, the airport. Conviasa, the national airline created during Chavez’s tenure as President, has seen its international routes cut significantly both as a result of international isolation and poor management: of the airline’s nine current destinations, eight are in Latin America and the Caribbean (the other one is Madrid).
Geographic isolation is one more way in which Venezuelans are feeling the effects of the exchange rate control and despondent foreign policy. Only one other place in the Western Hemisphere has experienced this isolation: Cuba. Unlike Cuba, however, where the restrictions were imposed by the US, the restricted travel to and from Venezuela is the direct result of Venezuela’s own mismanaged economic and diplomatic policies. As such, the president of the United States cannot decide to bring Caracas out of isolation the way he could with Cuba. Rather, reconnecting Venezuela to the rest of the world requires that the Venezuelan government make big changes to its current policies, something it is unlikely to do because, as the current vice president of that country has explained, the exchange control is as much a political measure as it is an economic one. While the effects of the exchange controls on food might be backfiring on the government as more and more people take to the streets to protest over shortages, the effects on air travel are just what you would expect: the ten most isolated countries in the world are all autocracies and the Venezuelan government seems keen on getting a spot on that list.
Fabiana Sofia Perera is a PhD candidate in the Department of Political Science at The George Washington University. Her research investigates social spending under conditions of resource dependence. Her dissertation examines social spending and unemployment in resource-dependent developing countries.