Don't expect a Venezuela regime change to offer an economic miracle cure: Don Pittis

While there is no question that the Venezuelan economy has been devastatedunder the leadership of NicolasMaduro, experts say aregime change will offerno miracle cure.

While Madurostill has many backersincluding the head of the country's military, who announced his support yesterdaymost analysts not directly aligned with the current government describe an economy that is not only in crisis,but a crisis that is deepening.

With no medicines and no money to buy them, Venezuela has become a reservoir of communicable diseases. Except for those close to the seat of power, people have trouble feeding their families. Corruption and violence, a problem familiar to Latin America, has grown worse.

Exporting skills

Venezuelans have been voting with their feet. An estimated 10 per cent of the population has alreadyleft the country, and as usual, it's those with the resources to move and the smarts to get international visaswho go.

They take with them the skillsessential to a modern economy.

Canada, the U.S. and Brazil are among thosebacking a new self-declared alternative president JuanGuaido, an elected official who wasnamed opposition leader and head of the National Assemblyearlier this month.

Maduro'scritics insist his legal mandate ran out on Jan. 10,the date of his latest inauguration,arguing the contested president's re-election last May was a sham and should notbe recognized.

"Canada has recognized that there needs to be at least some kind of popular mandate behind the person at the head of the government for the very difficult work that needs to be done to restore stability and bring Venezuela back to democracy," Ben Rowswell,Canada's former ambassador to Venezuela,toldCBC Radio'sAs It Happens.

But as the world has witnessed following other regime changes, including those of the Arab Spring, political rebellionis not enough.

In a country where the financial system required to feed its own people hasbeen severely broken, a change in government maynot keep its citizens satisfied for long.

The people now marching through the streets must begin to see their lives improve.

That will not be easy.

The first step is to tackle inflation, where Venezuela leads the world by a wide margin,says KurtAnnen, currently doing research on the economics of developing countries at theUniversity of Geneva.

Spend crazy, print crazy

"Governments just spendcrazy, and print money crazy, to finance that spending, which is what has been happening in Venezuela,"Annensaid in a telephone interview.

In other countries with severe inflation, funding from theInternational Monetary Fund (IMF)has helped get the problemunder control fairly quickly, he says.

"Other things are, I think, quite challenging," said Annen.

Reports listing the economic deficiencies of the current governmentmight leave the impression that beforeMaduro'spredecessor, the late Hugo Chavez,took power, Venezuela's economy was in excellent health.

That justisn't the case,Annensays.

"In 1999, when Chavez was elected, it was not that the economy of Venezuela was in good shape," said Annen.

After the discovery of oil in the 1920, the Venezuelan economy expanded substantially until the mid-60s. But then the economy declined, he says, andinequality grew.

"The nationalization of the oil company started way before Chavez,"saidAnnen, who thinks the only way to get the Venezuela economy back on track is to bring in private companies to exploit itspetroleum reserves, which arethe world's largest.

The resource curse

Managing its vast oil resources has provedto be a two-edged sword for Venezuelasomething that Jeanne Liendoobserved closely as a petroleum journalist in Caracas.

In many ways, the wealth from oil became a crutch for the Venezuelan economy, says Liendo, who came toCanada in 2013,where she now does research on energy policy at the University of Calgary. As the countrydepended more and more on energy revenues, other parts of the economy withered.

Following the mismanaged privatization of the oil industry that drove foreign investors awayand the sharp plunge inprices in 2014, the country'senergy revenues collapsed, with nothing to take their place.

Venezuela now imports crude to feed its refineries. To satisfy angry citizens, the government set prices for consumer goods, including gasoline, below the cost of production, driving many goodsproducers out of business.

"The state of the economy is so bad that whoever's going to lead the country is going to get in trouble," said Liendo.

And many of the educated people who managed to escape the current economic chaosare unlikely to return andbringtheir skills back, she says,even if the government were to change. With her kids growing up as Canadians, sheherself has no plans to return.

Groups of economists at U.S. universities have been working on competing "day after" plans in the event thatMadurosteps down or is ousted from power. But development economics is far from an exact science. Growing back an expunged private-sector economy will be the work of decades.

As Annen points out, in other countrieswhere the IMF has stepped in, their demands for austerity in exchange for bailouts have led to new painespecially for the country's poorestand freshpublic protests.

Canada's backing for political change and new democratic electionsmay bea first step. But totransformVenezuela into a strong economywith a stable government will require a much longer commitment.

Follow Don on Twitter @don_pittis