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

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While there is no question that the Venezuelan economy has been devastated under the leadership of Nicolas Maduro, experts say a regime change will offer no miracle cure.

While Maduro still has many backers — including the head of the country’s military, who announced his support yesterday — most 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 already left the country, and as usual, it’s those with the resources to move and the smarts to get international visas who go.

They take with them the skills essential to a modern economy.

Canada, the U.S. and Brazil are among those backing a new self-declared alternative president Juan Guaido, an elected official who was named opposition leader and head of the National Assembly earlier this month.

Maduro’s critics 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 not be 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, told CBC Radio’s As It Happens.

People gather in support of Venezuela’s opposition leader Juan Guaido, in Bogota, Colombia. Brazil, Canada and the U.S. have also thrown their support behind the self-declared president. (Luisa Gonzalez/Reuters)

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

In a country where the financial system required to feed its own people has been severely broken, a change in government may not 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 Kurt Annen, currently doing research on the economics of developing countries at the University of Geneva.

Spend crazy, print crazy

“Governments just spend crazy, and print money crazy, to finance that spending, which is what has been happening in Venezuela,” Annen said in a telephone interview.

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

“Other things are, I think, quite challenging,” said Annen.

Reports listing the economic deficiencies of the current government might leave the impression that before Maduro’s predecessor, the late Hugo Chavez, took power, Venezuela’s economy was in excellent health.

That just isn’t the case, Annen says.

Despite widespread opposition, President Nicolas Maduro still has many supporters, including the head of the country’s military, who announced his backing yesterday. (Miraflores Palace/Handout via Reuters)

“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, and inequality grew.

“The nationalization of the oil company started way before Chavez,” said Annen, who thinks the only way to get the Venezuela economy back on track is to bring in private companies to exploit its petroleum reserves, which are the world’s largest.

The resource curse

Managing its vast oil resources has proved to be a two-edged sword for Venezuela — something that Jeanne Liendo observed 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 to Canada in 2013, where she now does research on energy policy at the University of Calgary. As the country depended more and more on energy revenues, other parts of the economy withered.

Following the mismanaged privatization of the oil industry that drove foreign investors away and the sharp plunge in prices in 2014, the country’s energy 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 goods producers out of business.

People gather in support of Guaido in Lima, Peru. But even if he succeeds in changing the government, fixing Venezuela’s economy won’t be easy. (Mariana Bazo/Reuters)

“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 chaos are unlikely to return and bring their skills back, she says, even if the government were to change. With her kids growing up as Canadians, she herself has no plans to return.

Groups of economists at U.S. universities have been working on competing “day after” plans in the event that Maduro steps 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 countries where the IMF has stepped in, their demands for austerity in exchange for bailouts have led to new pain — especially for the country’s poorest — and fresh public protests.

Canada’s backing for political change and new democratic elections may be a first step. But to transform Venezuela into a strong economy with a stable government will require a much longer commitment.


Follow Don on Twitter @don_pittis 

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Real Estate

7 Tips For First-Time Home Buyers In Calgary

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Buying a house for the first time can be overwhelming to say the least. If you’re wondering what neighbourhood to go with, what you can afford, or even how to just get started on the process, let us take some stress off your hands! We’ve teamed up with Hopewell Residential to give you 7 tips to ensure the home you end up with is everything you dreamed of.

Hopewell Residential is a five-time Developer of the Year award winner, so their expertise is second-to-none in Calgary and beyond. Who better to learn home-buying tips from than the homebuilders themselves?

Create a checklist of needs & wants

This is a biggie. When you’re buying your very first home, you’ll want to weigh your needs vs. your wants. Ensuring you have what you love in your first home is a big, big deal.

What should you do? Easy. Set up a list of needs and a list of wants, but be pretty strict with yourself, and make sure you take your lifestyle into consideration. With the increase in remote work over the past year, it’s important to keep in mind that a home office or flex room might just be the key to maximizing at home happiness. Especially if you’re thinking you might be expanding your family later on, spare rooms and extra space is key (but more on that later!).

Or for instance, you might need a home in an area with a high walkability score, but you want to be close to certain amenities. Set yourself up with the right level of compromise and the number of homes that actually fit your ‘perfect’ idea will skyrocket.

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‘Don’t give up’: Ottawa Valley realtors share statistics, tips for homebuyers in ‘extreme’ sellers market

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The real estate market in the Ottawa Valley can be summed up this way: people from far and wide are in a buying frenzy, but there’s hardly anything to buy at the “store,” and the limited inventory is overpriced.

This “stampede” — as one realtor described it — will affect rural towns as residents grapple with finding affordable housing and agonize over their inability to purchase homes in their price range.

“We are seeing a lack of inventory in all price ranges,” said Laura Keller, a real estate agent from Carleton Place.

Helen Vincent, a Renfrew realtor, said she’s never seen a market like this in her 36 years of practice. “We postpone offers for four to five days in order to get all the buyers,” she said.

Multiple offers — between seven and 10 — became the norm, with cash offers and no conditions, as buyers faced bidding wars. “In Ottawa, they have up to 50 (offers),” she added.

“It’s very stressful. You’re going to get nine (people) ticked off, and one happy. So many people are disappointed,” Vincent said.

Terry Stavenow, an Arnprior realtor for 40 years, said that “the pent-up need took over with inventory going low. It made a stampede on everything that was available.“

“Brand new housing — it’s very much gone. Several building developers are rushing to get inventory. They usually don’t do construction in the winter months,” said Stavenow.

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Real Estate

10 Tips For First-Time Home Buyers

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Buying a home for the first time is exciting and a commitment to the future. It’s often challenging, too, and the process requires a lot of steps, many of which can be tricky to navigate as a first-time home buyer.

What are some things you should keep in mind as a first-time home buyer?

First-Time Home Buyer Tips

Here are 10 tips to keep in mind as you begin your journey toward homeownership.

1. Have Your Finances in Order

It’s wise to begin saving as early as possible once you’ve made the decision to purchase a house. You’ll need to consider the down payment, closing costs (which often range from 2% to 5% of the down payment), as well as move-in expenses.

You also need to understand the other costs of homeownership, such as mortgage insurance. property taxes, utilities, homeowner’s insurance, and more.

2. How Much Can You Afford?

Knowing how much you can realistically afford in a home is another important financial consideration. Look for the home of your dreams that fits your budget.

One way to avoid future financial stress is to set a price range for your home that fits your budget, and then staying within that range. Going through the preapproval process will help you understand what price range is realistic for your budget.

3. Make Sure Your Credit is Good

Another thing to keep in mind as a first-time home buyer is your credit score because it determines whether you qualify for a mortgage and affects the interest rate that lenders offer. 

You can check your credit score from the three credit bureaus – Experian, Equifax, and TransUnion.

This is another good reason for getting preapproved before you start your search. Learn more about the preapproval process and your credit score.

4. Choose The Right Real Estate Agent

A good real estate agent guides you through the process every step of the way. He or she will help you find a home that fits your needs, help you through the financial processes, and help ease any first-time buyer anxiety you may have.

Interview several agents and request references.

5. Research Mortgage Options

A variety of mortgages are available, including conventional mortgages – which are guaranteed by the government – FHA loans, USDA loans, and VA loans (for veterans).

You’ll also have options regarding the mortgage term. A 30-year fixed-rate mortgage is popular among many homebuyers and has an interest rate that doesn’t change over the course of the loan. A 15-year loan usually has a lower interest rate but monthly payments are larger.

6. Talk to Multiple Lenders

It’s worth your time to talk to several lenders and banks before you accept a mortgage offer. The more you shop around, the better deal you’re liable to get – and it may save you thousands of dollars.

7. Get Preapproved First

Getting a mortgage preapproval (in the form of a letter) before you begin hunting for homes is something else to put on your checklist. A lender’s preapproval letter states exactly how much loan money you can get.

Learn more about the preapproval process and how preapproval provides you with a significant competitive advantage in our article How Preapproval Gives You Home Buying Power.

8. Pick the Right House and Neighborhood

Make sure to weigh the pros and cons of the different types of homes based on your budget, lifestyle, etc. Would a condominium or townhome fit your needs better than a house? What type of neighborhood appeals to you?

9. List Your Needs and Must-Haves

The home you purchase should have as many of the features you prefer as possible. List your needs in order of priority; some things may be non-negotiable to you personally.

10. Hire an Inspector

Hiring an inspector is another crucial step in the home buying process. An inspector will tell you about existing or potential problems with the home, and also what’s in good order. You can learn more about home inspections and how to find a home inspector through the American Society of Home Inspectors website.

Buying a home for the first time is a challenge, but it’s one you can handle with the right planning and preparation.

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