Across Venezuela, delivery trucks are protected by armed guards ready to defend them from civilian looting. The food they carry is extremely precious to the Venezuelan people, especially during the current economic hard times. From January to May 2016, Venezuelans attempted to raid at least 254 businesses in search of food and other scarce supplies. These raids are the result of the high costs of basic necessities in the country.
According to recent data, 87 percent of Venezuelans don’t have money to buy enough food for their families. Those who do spend an average of 72 percent of their monthly wages on nutrition. Supermarkets, struggling to replenish shelves after being ransacked, now lack 80 to 85 percent of their usual stock. Public outcry has rung loudly, to the tune of 2,138 protests between January and April 2016.
With the recent decline of global oil prices, Venezuela has plunged into a severe economic and humanitarian crisis, suffering the world’s largest economic contraction in 2015. However, rather than addressing an economy in freefall, the government is instead focused on quelling discontent, including protests related to the food crisis and efforts to oust the current president. Ultimately, the Venezuelan government’s inability to address economic and political instabilities may force the regime to collapse before it can provide adequate support for its people.
A Legacy of Crisis
Venezuela’s severe shortages and resulting protests are reminiscent of the Caracazo, a series of riots that engulfed the country in 1989. At the time, the government was burdened with $33 billion in foreign debt and was struggling with its own economic sluggishness. The charismatic Hugo Chavez gained prominence promising to fix the dismal situation, and working class citizens supported him, forming the Chavismo movement. He was elected president in 1999, and an economic rebound followed.
Oil is the lifeblood of the Venezuelan economy, accounting for 25 percent of the country’s GDP. So, when oil prices surged in the early 2000s, the country experienced an influx of wealth. The National Assembly, Venezuela’s legislative body, granted Chavez the power to rule by decree. He used this power to direct the influx of oil revenues toward social programs, increasing the public debt fivefold and making the economy even more dependent on crude exports. During Chavez’s presidency, oil rose from 80 percent of total exports to 95 percent. Chavez also reduced the domestic price of gasoline drastically to reduce costs for Venezuelans: official prices were $0.05/gallon, with black market prices lower than $0.01/gallon.
Chavez’s policies to strengthen the economy backfired, especially as oil prices declined in 2014. He restricted access to dollars by fixing the exchange rate, which resulted in an extensive black market. Today, the official exchange rate is 10 bolivars per dollar, but on the black market, it is more than 1,000 bolivars per dollar.
He also prohibited raising prices of food and other essentials. This made the production of basic goods unprofitable, creating extreme food shortages. What little food could be bought is now sold in the shadow economy for exorbitant prices: $150 for a dozen eggs, for example.
Finally, Chavez protected workers by making them hard to fire. To promote economic stability, the country has passed firing freezes, where public and private sector employees cannot lose their jobs. Companies must now get special government permission to fire workers, even if they do not show up for work. However, Venezuelans can make more money by selling goods in the black market or selling their cheap oil in neighboring countries than they can by working at their jobs. As a result, employee absenteeism 46 percent in some sectors.
Having become accustomed to expensive foreign products during times of plenty, the country is now dependent on imports it cannot afford. By increasing his control over the economy, Chavez also created an overbearing regulatory environment that adds to the difficulty of doing business: Venezuela is now ranked 176th of 178 countries by the Heritage Foundation’s Freedom Index, just beating Cuba and North Korea. The president’s shortsighted economic policy, largely meant to maintain his own popularity, has resulted in a nation unable to function in a world of low commodity prices.
By Chavez’s death in 2013, the national external debt had reached $90 billion, and inflation averaged 22 percent. In early 2014, inflation reached 56 percent. In January 2013, the central bank’s scarcity index—meant to measure the availability of consumer goods—reached 16.3 percent, indicating “critical” or “serious” scarcity in 17 basic food products. In February 2014, the index had increased to 28 percent of all basic food product—then described as a record level—and has now reached 80 percent. Though inflation is officially measured at 180 percent, the IMF estimates it to be nearly 700 percent.
But although Chavez’s policies proved short-sighted, his personality kept him afloat. His successor, Nicolás Maduro, has had trouble meeting the public’s expectations for a charismatic and revolutionary leader. Riordan Roett, director of the Latin American Studies Program at the Johns Hopkins School of Advanced International Studies, explained in an interview with the HPR that Maduro, a former bus driver, is “not particularly policy-oriented, and [from] the impression we get from what he says, not particularly intelligent. So the Chavista movement is now led by a president who has very little popular support.”
The Venezuelan government’s popularity has plummeted even among loyal Chavistas. According to Roett, “from interviews of the man on the street, for example, it appears as though a number of Chavistas are fed up with Chavismo and really would like a different government.” He went on that “one rumor is if things get any worse … the Chavista movement may find an excuse to get rid of Maduro and move the vice president up.” The lack of support within the party is notable because Chavez was popular even when the economy had begun to turn, with approval ratings as high as 61 percent; Maduro’s approval rating is now 11.6 percent.
Opposition groups have called for a referendum to remove Maduro from office, garnering at least 1.85 million votes of support. This has created a political crisis that has captured the government’s attention.
A Resisting Government
The Venezuelan government is utilizing state resources to block the referendum from passing.—the National Electoral Council announced that more than 600,000 signatures on a petition supporting the referendum were invalid. The person in charge of validating the referendum process, Jorge Rodriguez, is one of Maduro’s allies and has initiated a lawsuit against the opposition in the Supreme Court. Although the petition still has more than enough signatures needed to initiate the referendum, the lawsuit could hurt the movement chances of success in future stages by bringing into question its legitimacy and setting the precedent for government invalidation.
The Venezuelan government has also stifled the opposition is by arresting its leaders. In February 2014, for example, Leopoldo Lopez was arrested and put in solitary confinement for encouraging protests that later became violent. According to Franklin Nieves, one of Lopez’s prosecutors, the government fabricated charges to satisfy Maduro’s demand for an arrest. The trial itself was criticized for not hearing the defense’s witnesses or evidence, and the United States and United Nations have since called for Lopez’s release. This arrest of a prominent opposition leader showed the lengths to which Maduro was willing to go in order to stay in power.
Maduro, during a 2014 meeting with Russian President Vladimir Putin.
Furthermore, even though the opposition now controls the majority of seats in the National Assembly, their influence has been limited by pro-government justices appointed by Maduro. Last December, various opposition groups, collectively called the Democratic Unity Roundtable, won 112 out of 167 seats in the legislative election. The outcome gave them a supermajority, but the Supreme Court withheld three delegates from serving in the National Assembly because of alleged irregularities in the election. This suspension has prevented the Roundtable from actually achieving supermajority status. In addition, the courts have overturned many new laws passed by the Assembly, some of which were aimed at stabilizing the economy, allowing for removal of judges, and freeing 120 imprisoned activists and politicians. Thus even the great success of winning control of the Assembly has not freed the opposition from Maduro’s grasp.
Maduro has been forced to find short-term political solutions to his unpopularity, partially because his hands have been tied economically by Chavez’s legacy. The government is attempting to gradually reverse Chavez’s previous policy of unsustainably low gas prices but fears protests over increased gas prices like those in 1989 could erupt once more.
A Failed State
Some people predict the referendum will pass and oust Maduro, but it’s also possible that referendum will only cause further conflict. The various groups that comprise the opposition coalition differ vastly in goals and ideology, and their differences are “currently being papered over by the fact that there is coherence around the referendum strategy,” according to Alejandro Velasco, associate professor at New York University. The groups’ post-referendum strategies are so different that if the referendum passes, a power struggle could erupt in Venezuela. The current inefficiency and unrest could therefore continue beyond Maduro.
Roett believes that international interventions, like domestic reform efforts, will also be unable to help the country in the short term. Latin American countries are wary of getting involved because they worry that Venezuela would “turn around and try influencing their politics.” Although Roett admits “it’s a facetious argument,” it’s still widely believed in a region where countries are highly protective of their sovereignty. The combination of governance issues and other countries’ unwillingness or inability to help has resulted in Venezuela becoming “a failed state” that, according to Roett, “could break out into an open civil war.”
Matthew Taylor, a senior fellow in Latin American studies at the Council on Foreign Relations, believes that “the current crisis may only reach lasting resolution when it becomes so unbearable that the regime breaks apart from within.” Venezuela has “unprecedented” levels of poverty, he told the HPR, and there is limited progress in the standoff between the opposition and Maduro, who “shows no signs of backing down.” As the government continues to struggle to pay debts, an economic default seems likely. Ultimately, Taylor concluded, “things are probably going to have to get worse before they get better.”
Certain elements of the current crisis, like riots over the weak economy and food shortages, are reminiscent of the crisis that enveloped Venezuela as Chavez rose to power. Chavez won votes with his promise of economic stability and a corruption-free government, but Venezuelans now find themselves in a situation eerily similar to that of 1989. However, this crisis may not be able to find as peaceful an ending.
Image Source: Flickr/Carlos Díaz / en.kremlin.ru