Lessons from Venezuela for Sri Lanka

By Dhananath Fernando

Originally appeared on The Morning

Venezuela is often discussed today through the lens of geopolitics, sanctions, and global power games. But if we set those aside for a moment, the country offers a far more fundamental lesson. It is a reminder of how moving away from basic market principles can slowly push even a resource-rich nation to its knees and eventually turn it into a geopolitical problem.

At one point, Venezuela stood among the most prosperous countries in Latin America. Its citizens enjoyed living standards comparable to advanced economies in the region. Today, that reality feels distant.

The collapse did not come from a lack of resources. Venezuela sits on vast oil reserves and is rich in other minerals as well. The problem was not what the country had, but how it chose to manage what it had.

For decades, Venezuela’s oil industry attracted global companies, expertise, and capital. Productivity was high, technology improved, and the sector generated steady income. That changed when the State decided it should take full control.

Nationalisation sent a clear signal that private investment was no longer welcome on fair terms. Efficiency declined, reinvestment slowed, and political priorities replaced commercial logic. Profits that should have gone back into maintaining and improving production were instead used to fund widespread subsidies.

When global conditions were favourable, this model appeared to work. Oil revenues masked structural weaknesses. But when prices turned, the system had no buffers. Subsidies could not be sustained, production could not be ramped up, and confidence had already evaporated.

The State turned to the easiest option left: printing money. What followed was a devastating inflationary spiral that destroyed savings, wages, and trust.

Once inflation runs out of control, people respond in predictable ways. Workers leave. Skills drain away. Businesses shut down or relocate. Venezuela experienced this painfully.

As foreign companies exited and domestic capacity weakened, productivity fell further, creating a vicious cycle. Sanctions later worsened the situation, but by then the foundations had already cracked. The greatest cost was borne not by politicians or ideologues, but by ordinary Venezuelans.

Sri Lanka does not need to look at Venezuela as a distant or irrelevant case. Too often, we have followed a similar logic, believing that the State can run businesses efficiently while ignoring the political interference that inevitably follows.

We have also been suspicious of foreign investors, forgetting that resources only become valuable when capital, technology, and skills are combined with them. Without investment, even the richest endowments slowly lose their economic meaning.

The story of subsidies is another shared lesson. Prices exist for a reason. They signal scarcity, abundance, and trade-offs. When prices are artificially suppressed, demand grows without regard for supply or cost.

It is no different from spending beyond one’s income and hoping the bill never arrives. Sri Lanka learnt this the hard way through unsustainable fuel and electricity pricing, which played a central role in the recent economic collapse.

There is also a deeper lesson about money itself. Before the crisis, many in Sri Lanka believed that money creation could continue without consequences, echoing arguments once made in Venezuela. But money is not just paper or digits. It is a store of value based on trust. When that value is diluted without public consent, people respond with anger, protest, or migration. Sri Lanka saw all three during and after the crisis.

Venezuela’s experience goes beyond geopolitics. It is a cautionary tale about abandoning basic economic principles. When countries ignore incentives, undermine markets, and treat capital with suspicion, they make themselves fragile. That fragility invites external shocks and political pressure from abroad.

For Sri Lanka, the lesson is clear. Staying anchored to sound economics is not an ideological choice. It is a practical necessity. If we want stability, prosperity, and genuine independence, we must respect markets, welcome investment, price resources honestly, and protect the value of money. The alternative is not self-reliance; it is slow decline, followed by crisis.

(The writer is the Chief Executive Officer of Advocata Institute. He can be contacted via dhananath@advocata.org)

(The opinions expressed are the author’s own views. They may not necessarily reflect the views of the Advocata Institute or anyone affiliated with the institute)

Economic resolutions for 2026

By Dhananath Fernando

Originally appeared on The Morning

We all have New Year’s resolutions. Most of the time, they are not new at all. They are the things we always wanted to do, but never made time for, or never had the courage to start. So every year we repeat the same promise in different words, hoping that this time will be different.

Sri Lanka is not very different in 2026. As a country, we also have resolutions. They are familiar, inspiring, and regularly repeated. Yet they remain largely unfinished.

In many cases, we did not fail because we lacked effort. We failed because we misunderstood the problem. We kept chasing outcomes without fixing the process.

For years, our national resolution list has looked more or less like this:

• A trading hub in the Indian Ocean

• Export diversification

• A tourism paradise

All three are still worth keeping for 2026. But if we want them to be more than slogans, we have to turn them into a reform checklist and not just a speech.

Trading hub is not about ships

Becoming a trading hub is not primarily about the ocean, shipping containers, or building warehouses near the port. It is about building a policy environment that attracts competent people and serious capital, and allows them to move goods quickly, add value, and serve markets.

Trading hubs do not manufacture everything they consume. That is not the point. A trading hub brings things from all over the world, stores them, processes or packages them, trades them, adds value, and sends them back to where demand is. It is an ecosystem, not a factory.

That ecosystem depends on speed, predictability, and cost.

In Sri Lanka, the cost of trading is high not only because of distance but because of policy. Para-tariffs and complex border taxes raise input prices. Slow and discretionary Customs processes delay shipments. Barriers to entry in logistics and shipping reduce competition. Labour rules and immigration processes make it difficult to attract global talent or even short-term specialists.

If 2026 is serious about the trading hub dream, then the resolution is not to ‘become a hub.’ The resolution is to do the hard and unglamorous work: modernise the Customs Ordinance, simplify border procedures, reduce para-tariffs, and remove barriers for entry and ownership in shipping and related services.

We should also reform labour and entry processes so skilled foreigners can work here easily, contribute, and move on if needed. Trading happens when trading becomes easier and cheaper than in competing countries.

A hub is not declared. It is designed.

Export diversification cannot happen on speeches

Export diversification has been discussed for so long that it has become a classroom lesson. Yet our export basket remains narrow and our transformation has been slow.

The reasons are not mysterious. They are structural.

Export diversification depends on factor markets working well: land, labour, and capital.

In Sri Lanka, land is difficult to use productively because ownership, access, and clear titles are complicated. Labour shortages are real, but the deeper problem is skills. A modern export economy requires technicians, designers, engineers, supervisors, and managers, not only workers. Capital is also a constraint, and capital for new industries often needs to come from outside through foreign direct investment.

But investors do not move money just because a country ‘needs dollars.’ They look for a level playing field, regulatory predictability, and access to markets. They also look for reliable infrastructure and a stable macro environment.

So if 2026 wants export diversification, the resolution cannot be another line in a policy document. It has to be a shift in how we attract and support investment.

The Board of Investment must be strengthened and reoriented towards active investor facilitation, not paperwork. Industrial zones should be opened to professional private sector operation and management. The country must actively pursue market access and trade facilitation, because new industries will not come if they cannot sell competitively.

Diversification is not a solo act. It is a system working together.

Tourism paradise needs policy, not posters

Tourism is often marketed with sunsets and smiles. But higher-spending tourists do not arrive because we printed better brochures. They arrive because the product is better and the experience is seamless.

If Sri Lanka wants to be a tourism paradise in reality, then the policy environment must help the sector upgrade.

Hotels should be able to renovate and expand without construction costs being inflated by tariffs and restricted access to quality materials and modern designs. We cannot talk about high-value tourism while making it expensive to build high-quality tourism infrastructure.

Airports and connectivity matter too. Capacity constraints and slow expansion weaken the entire tourism plan. And aviation needs competition, not protection. Monopolies and market distortions in aviation may keep certain entities alive, but they keep the country small.

Tourist destinations also need better services. That means managing and leasing services properly, creating space for private investment, improving safety and cleanliness, and creating real spending opportunities beyond hotel walls. A tourist cannot spend money if there is nothing to do, nowhere to shop, and no quality experience to buy.

A tourism paradise is built on policy decisions, not on slogans.

The resolution underneath all resolutions

There is one resolution that sits underneath all the others: monetary stability.

None of the above dreams work if inflation rises, the exchange rate becomes unpredictable, and confidence collapses. Businesses do not plan long-term investments when the value of money itself is uncertain. Tourists do not come in large numbers when macroeconomic instability turns into shortages, controls, and political tension. Exporters cannot build stable supply chains when the policy environment swings with every crisis.

In that sense, the country’s New Year’s resolution is not only about what we want to become, but about what we must protect: low inflation, a sound currency, credible fiscal management, and rule-based policy.

New Year’s resolutions, whether personal or national, are more about process than promises. Outputs come when the process is followed. Pronouncing the outcome without committing to the steps is how we fail every year, as individuals and as a country.

So perhaps Sri Lanka’s economic resolution for 2026 should be simple: stop repeating the dream and start doing the list.