Maduro’s Favorite Economist Says Venezuela Is a ‘Real Mess’By and
Economist Michael Hudson responds after Maduro lauds his work
Says he knows little about Venezuela but sees a ‘real mess’
Last week, Nicolas Maduro, the embattled president of crisis-torn Venezuela, veered a bit off course during a rambling, hour-and-a-half speech to business leaders in Caracas to heap praise on a somewhat obscure U.S. economist.
“I don’t know if you know him, but I recommend his writings,” Maduro said of Michael Hudson, a professor at the University of Missouri who specializes in subjects including international finance and debt. “He’s one of the greatest U.S. economists.”
Yet, Hudson, it turns out, appears to be no fan of the socialist leader. When contacted a few days later, he had harsh words about the state of the Venezuelan economy since Maduro replaced the late Hugo Chavez in 2013, saying it seems to have “entered a period of anarchy” so profound that he doesn’t know if he could help the country much even if he were asked. Which, by the way, he hasn’t been. He’s no Venezuelan expert, he stressed, but he did have one tentative suggestion for the president: If a debt default looks inevitable, as many analysts believe is the case, it’s best to get it over with as soon as possible.
“If they realize they can’t pay later, they should stop now,” Hudson said. “You might as well keep what you have and say ‘it’s obvious we can’t pay, they made us a bad debt and they should take the loss.’"
It’s a recommendation that doesn’t figure to go over well back in Caracas. When Ricardo Hausmann, a Harvard professor and Venezuelan native, made a similar suggestion in 2014, Maduro labeled him a “financial hitman” who was trying to topple the government.
Concerned that a default would ensnare the state oil giant in legal problems, administration officials have been scrounging together resources to meet foreign bond payments after a plunge in oil exports sunk the economy into a depression and sparked runaway inflation and widespread shortages. In that very same speech last week in which Maduro praised Hudson, he gave a passionate defense of his decision to pay back the debt.
“Do you think we would have been better off in default?” Maduro asked. “Let’s think of the national interest, of our land. There continue to be insipid people who attack Venezuela from the inside and outside.”
Bondholders continue to brace for some sort of debt moratorium or restructuring. The country’s benchmark bonds trade at just 50 cents on the dollar. Part of Hudson’s argument for defaulting immediately is that if a government thinks it may later argue in court that the debt was “odious,” or illegitimate, continuing to pay it now undermines that position. The next test for Venezuela comes in April, when the oil company, known as PDVSA, is slated to repay $2.5 billion.
‘Killing the Host’
Hudson, while not a high-profile name in the U.S. or abroad, has developed something of a following in international finance circles over the years. He’s advised governments in Iceland, Latvia and China on tax law and finance, according to his website, and has penned numerous books including one called “J is for Junk Economics: A Guide to Reality in an Age of Deception” that came out last month.
He suspects, judging from some of Maduro’s comments, that it was his 2015 book, “Killing the Host,” that put his name on the Venezuelan government’s radar. In that book, he argued that banks mainly lend to buy property that’s already been developed and that corporate earnings have funded stock buybacks and dividends instead of being directed toward investment.
Hudson, 78, said he’s never spoken with Maduro, has had no contact with the government and has not paid much attention to the country of late. He’s seen enough and heard enough from Venezuelans, though, to know that the economy is a “real mess.” The task of fixing it looks so daunting, in fact, that he said he’d be disinclined to add an advisory role to his busy schedule if asked to.
“I prefer to work with countries with problems that can be solved," he said.
— With assistance by Noris Soto