Wednesday, June 22, 2016 2.29PM / The GuardianUK Briefing
The shadow of hunger, desperation of crowds queueing for food and the spread of unrest are threatening the government of Nicolás Maduro
What is the story?
Venezuela is suffering the worst economic crisis in its history. Ordinary people in the oil-rich country are regularly going without food. Three-quarter empty supermarkets are being ransacked by angry, hungry mobs. The government has declared a state of emergency, food is now being transported under armed guard, and basic necessities are being rationed. People have to queue for hours and sometimes overnight on their assigned days to receive staples like rice and cooking oil.
By IMF figures, it has the world’s worst negative growth rate (-8%), and the worst inflation rate (482%). The unemployment rate is 17% but is expected to climb to near 30% in the coming few years.
The shadow of hunger, the desperation of the crowds and the spread of unrest and criminality threaten the government of Nicolás Maduro, three years after he was bequeathed power by the dying revolutionary strongman, Hugo Chávez. The opposition has launched a drive to canvas signatures for a petition for him to step down. That will be a difficult task in the face of a state-run electoral system determined to thwart it, but the state may implode even if the recall referendum fails.
How did such an oil-rich state collapse so catastrophically?
The Maduro government has blamed the crisis on the US and rightwing business owners who it accuses of cutting production to sabotage the economy, but Maduro has inherited a ruinous state-run system from Chávez to which economists say he has added some damaging mistakes of his own. Chávez build his popularity on oil money and foreign debt, using both to fund consumption, while nationalising more than 1,200 private companies deemed not to be functioning in the public interest. But in 2015 the oil price was cut in half and Venezuela’s reckless public finances helped make it a high-risk debtor, cutting the country’s access to international capital.
The Maduro government has responded to the consequent hole in public finances by printing money, fuelling inflation. It’s estimated that the cost of basic groceries that would keep a family going through a week increased by more than 25% between March and April, and now costs 22 times the state minimum salary.
The state has tried to ration basic foodstuffs and set their prices, but the consequence is they have simply disappeared from the shops into the black market. The opposition says the direct distribution of food has been politicised by being channeled through local committees run by Maduro’s United Socialist Party of Venezuela.
According to Transparency International, Venezuela is the ninth most corrupt country in the world. Member’s of Maduro’s family and immediate entourage have been implicated in drug smuggling and hundreds of billions of dollars are believed to have been syphoned out of the economy.
The crisis is likely to get even worse in the near future.
The government has been running through the country’s gold reserves to pay its international debt service and finance at least some basic imports, but those reserves are now dwindling, and Maduro will either have to default or stop importing food. Both options are potentially catastrophic.
Will Maduro be brought down by the recall referendum?
The opposition have put high hopes in a referendum, and launched a signature drive in April but Venezuela’s National Electoral Council (CNE) has imposed a set of high hurdles for a petition to pass before the choice can be presented to the general population. Roughly 1.3 million people signed a petition for a recall vote – far more than the 200,000 required by law, but 600,000 of the signatures have already been rejected by the CNE, and people have been queueing for hours to validate the rest of the signatures by having their fingerprints scanned. Even if they are found to have passed the required threshold of 1% of voters, that just allows them to go forward to a second petition, in which opponents would have to amass close to 4 million votes to trigger a recall vote.
The Maduro camp argues the opposition have left the petition too late for a referendum this year, a claim his opponents vehemently contest. The issue of timing is critical. If Maduro is ousted after January 2017, his place can be passed to his vice-president, keeping power in Socialist party hands.
How has the rest of the region responded?
The Maduro government has regional allies that have protected it from external pressure. Recently the secretary general of the Organisation of American States, Luis Almagro told the Guardian that Argentina had been working behind the scenes to obstruct an OAS assembly to discuss the economic crisis and human rights crises in Caracas, amid reports that the two governments had done a deal involving guaranteed Venezuelan support for Argentina’s candidate for UN secretary general, Susan Malcorra. Venezuela’s other neighbours have also been accused of standing on the sidelines – for either economic or ideological reasons – while the country slides into chaos.
The crisis may be forcing a thaw in relations with the US, long presented as a bogeyman by Chávez and then Maduro. The US under secretary of state, Thomas Shannon, flew to Caracas this week, following a meeting at the OAS between John Kerry and his counterpart, the Venezuelan foreign minister, Delcy Rodríguez.
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