The World Bank’s rapid reconstruction report for Venezuela, published in record time following the earthquakes of June 24, is one of stark contrasts. It is a valuable first draft, a testament to the work of the Bank’s technical teams and their collaborators. It provides crucial preliminary data on the human losses and physical destruction. Despite the technical quality of the report, it suffers from fatal weaknesses that undermine the reconstruction it aims to guide. By failing to address the country’s crushing external debt, and by making poor modeling choices, the Bank has crafted a plan that is too cautious to be effective.

This is not simply a technical oversight imposed by a publication deadline; the report’s shortcomings reflect the deep conflicts of interest within the multilateral system and the governance challenges in Venezuela. Without a radical shift in approach and a clear compact for financing, the reconstruction will fail, condemning millions to yet another decade of economic and political deprivation.

The Disaster

The GRADE report details the costs of rebuilding. The total direct damage is estimated at US$19.6 billion. The breakdown is: residential buildings account for US$9.3 billion, non-residential buildings US$5.0 billion, and essential infrastructure US$5.2 billion. These figures are likely underestimates, as they are based on replacing older, substandard structures rather than building to modern, more resilient codes.

The human toll is catastrophic, with nearly 5,000 dead, over 16,700 injured, and an estimated 1.8 million people, including 680,000 children, in need of humanitarian assistance. The collapse of over 900 schools and 38 hospitals has further crippled social services. The immediate focus is rightfully on these tangible losses, but the Bank’s proposed path to recovery is where the blueprint fades.

Buildings destroyed by the June 24 earthquakes, La Guaira, Venezuela, June 28, 2026. Photo Credit: Wikimedia Commons.
Modeling a Stagnant Future

The Bank’s macroeconomic model, which projects the impact of reconstruction efforts, is a powerful tool but the report does not use it well. The model posits two scenarios: a “without fiscal response” (where Venezuela does almost nothing) and a “with fiscal response,” where it mobilizes US$9.8 billion in public financing and US$9.6 billion in private investment, for reconstruction needs. The model’s conclusions are alarming. In the “without” scenario, consumption remains suppressed for a decade. In the “with” scenario, the model projects that consumption would recover to pre-earthquake levels only by 2030, barely exceeding them in the following years.

The Bank’s analysis is flawed. It suffers from “spurious precision” — why not say US$420 billion instead of US$19.6 billion? The model data and parameters are poorly explained. Most critically, the scenarios are far too limited. The “without” scenario is not credible; it assumes Venezuelans and the international community would stand idle. Conversely, the “with” scenario is outrageously conservative. The projected increase in consumption is effectively zero over a ten-year period. This outcome, which would be unacceptable in any context, is the predictable result of an institution being influenced by the IMF’s restrictive orthodoxy, focusing on debt repayment over recovery.

The model ignores crucial realities. It omits the substantial costs of environmental remediation, such as asbestos dust and oil leaks, which will cause long-term health costs and add to the final bill. It does not address distributional effects, despite having household data that could model the disproportionate impact on the most vulnerable.

The report is evasive on the source and timing of the projected US$9.6 billion in private investment; it ignores the likelihood, as we already see in press accounts, that foreign investment in Venezuela will be largely restricted to oil, gas, and minerals. Wholesale foreign direct investment will require expensive sovereign guarantees and is likely to demand crippling fiscal incentives, posing a risk to long-term fiscal sustainability. The report’s silence on these political-economic realities renders its financial projections nearly meaningless.

The Great Omission: Debt Restructuring

My major critique of the GRADE report is its inexcusable failure to address Venezuela’s external debt. Significant portions of new financing and of the country’s future revenues will be diverted to service its international debt. Without a comprehensive debt restructuring, at a steep discount to lenders, the reconstruction effort will fail. The report’s model ought to have had at least a third scenario that accounts for the fiscal burden of debt service after a workout.

This omission is not a mistake; it is a political choice. It allows the World Bank and its major shareholders to pretend that reconstruction is purely a technical issue, ignoring the ongoing looting of Venezuelan resources, evidenced by the US-controlled escrow account holding billions in oil revenues. Until a sustainable debt restructuring is signed, no one can be certain that reconstruction funds will not be diverted to foreign creditors. The Bank and the IMF have a vested interest in maintaining the status quo, which puts the interests of foreign lenders and investors over those of the Venezuelan people.

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A Compact for Reconstruction

A credible rebuilding plan must start with a clear, immediate compact that prioritizes humanitarian needs and fiscal sustainability. Such a compact must lay out concrete targets for concessional financing. An initial US$4 billion in cash transfers from multilateral concessional sources is needed to provide unconditional support to Venezuelan households.

This should be followed by a further US$10 billion in soft financing for residences, non-residential buildings, and water infrastructure. Crucially, this compact must also stipulate that the IMF’s contribution is strictly limited to covering the upfront costs of the debt restructuring, not to enforce austerity that would cripple the rebuild.

The people of Venezuela conduct a search and rescue in the aftermath of the June 24 earthquakes, La Guaira, Venezuela, June 28, 2026. Photo Credit: Wikimedia Commons.
Risks and the Path Forward

The path forward is risky. Corruption is the primary threat, as the rush to rebuild creates a golden opportunity for theft. To mitigate this risk, all contracts must be awarded through transparent, competitive procedures, resisting the pressure from connected operators who will inevitably plead for speed. Furthermore, the reconstruction compact must guarantee legal protections for civil society, as they are on the front lines of providing essential services and act as a check against abuse.

Finally, the role of the World Bank itself is a significant risk. Its leadership is susceptible to pressure from its largest shareholder to engage in “churning,” providing guarantees for private loans that simply make the debt problem worse. The Bank must resist becoming a tool for financing the debt restructuring itself, which would only limit its capacity to fund the cash transfers and infrastructure needed immediately.

Conclusion

The World Bank’s GRADE report is a valuable piece of technical assessment, but it is a political failure. By sidestepping the debt issue and presenting a conservative, business-as-usual approach, the Bank has undermined the very cause of reconstruction.

These are not the failings of the technical teams, but of a management that refuses to confront its largest shareholder. The plan it offers condemns Venezuela to a decade of stagnation. The reconstruction effort will fail unless it is built on a foundation of genuine debt relief, transparent governance, and a compact that puts the needs of the Venezuelan people above the balance sheets of international creditors. The Bank must be more than a commercial lender; it must be a partner in recovery, and that requires telling its shareholders a truth they do not want to hear.

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An extended version of this article was originally published on the authors’ Substack.

Editor’s Note: The opinions expressed here by the authors are their own, not those of impakter.com