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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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Montreal real-estate prices climbing much faster than Toronto or Vancouver: study

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MONTREAL — The cost of housing per square foot has skyrocketed in Montreal while other cities saw little change over the last year, according to a new national survey.

The study found that condominium prices in downtown Montreal are up 13.5 per cent from last year to, on average, $805 per square foot.

That’s not as high as other cities, but it’s catching up — and Montreal’s rate of growth is outpacing other major Canadian cities.

Toronto’s condo prices grew to $1083 per square foot, an increase of just under 10 per cent, according to the study. In Vancouver, where you can find some of Canada’s most expensive condo prices, rates are down 4 per cent to $1192 per square foot.

To make the comparisons, Canadian real estate giant Century 21 collected data from real estate boards across the country to calculate the home costs per square foot.

“It’s important to compare apple to apples,” said Todd Shyiak, the company’s vice president of operations.

Montreal’s rise was even more explosive for detached homes and townhouses.

Detached houses in Montreal’s downtown and southwest rose to $958 per square foot, 40 per cent up from last year.

“It’s wild,” said Century 21 broker Angela Langtry. She says the pandemic raised demand.

“People had a lot of time to figure out they don’t like the home they’re in,” she said. “They all want pools.”

There was a big spike in sales, she noted, following a pause in brokerage during the spring, at the peak of the pandemic.

Experts say the pandemic will push people into the suburbs as they search for affordable housing and home office space.

“A huge portion of our society’s housing needs changed overnight,” said Shyiak. People “no longer need to be 10 minutes from the office.”

He says that could mean less demand for condos in the future. “People want their own front door,” he said.

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Carttera buys prime downtown Montreal development site

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Carttera has acquired a prime downtown Montreal site at 1455 De La Montagne St. which will mark its third development on the thoroughfare.

“We think it’s probably one of the best, if not the best, locations in the whole city,” Carttera founding partner Jim Tadeson told RENX. “We’ve had great success on De La Montagne.”

The two earlier projects are: L’Avenue, a building with 393 residential units, 84,000 square feet of office space and 34,000 square feet of retail that was developed with Broccolini and occupied in 2017; and Arbora Residences, a two-phase development with 434 rental and condominium units in three buildings being built in partnership with Oxford Properties.

Thursday’s latest acquisition, for $48.5 million from 630745 Ontario, is a 31,750-square-foot surface parking lot with flexible mixed-use zoning on the corner of De La Montagne and De Maisonneuve Boulevard West.

The site is near the Vogue Hotel Montreal Downtown, the new Four Seasons Hotel Montreal and high-end retail.

“It’s zoned for up to 203,000 square feet of density, which we’re going to take advantage of,” said Tadeson. “Our vision for the site is a condominium project with some retail.”

Since there is no demolition required and no heritage issues to contend with, Toronto-based Carttera plans to move ahead quickly with the luxury project.

It’s in the concept design phase and Tadeson said it could take six months or more before it’s prepared to make a submission to the city.

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Montreal Has the Hottest Real Estate Market in Canada Right Now

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If you thought Toronto’s real estate market was on fire, it’s time for a second take, because the market in Montreal is the hottest in all of Canada right now.

A newly-released annual report from CENTURY 21 Canada reveals that, following an early-spring decline due to the COVID-19 pandemic, sales numbers are bouncing back and house prices across the country are maintaining their strength. The study compared the price per square foot of properties sold between January 1 and June 30 of this year, compared to the same period last year.

In Toronto and Vancouver, unsurprisingly, prices remain high. But while regions across the country are seeing varied stories when it comes to their housing market fluctuations, Montreal stands out — there, prices have increased dramatically since 2019. While the numbers remain lower than Toronto and Vancouver, that housing market is proving to be the country’s strongest right now.

In Quebec’s largest city, prices have increased significantly since last year, particularly in the downtown detached house and townhouse markets. For example, the price of a detached house in Montreal’s downtown and southwest rose 42.14% to $958 per square foot, while townhouses went up 44% to $768, and condos, 13.55% to $805. Comparatively, in Toronto and Vancouver, prices saw more modest increases or, in some cases, even declines.

“Even though real estate in Quebec was not considered an essential service, we have seen strong demand and a jump in prices in 2020,” said Mohamad Al-Hajj, owner of CENTURY 21 Immo-Plus in Montreal.

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