Every week, The WorldPost asks an expert to shed light on a topic driving headlines around the world. This week, we speak with analyst and author Alejandro Velasco on the economic and political crisis gripping Venezuela.
As floundering oil prices cause economic chaos in Venezuela, things have deteriorated to the point where many government offices are open barely two days a week to save electricity. Food shortages are spurring lengthy lines for basic necessities, and drought has made the situation worse as even water becomes scarce.
In a number of cities, protesters have clashed with security forces to demand government action and a referendum to recall embattled President Nicolás Maduro. The successor to longtime leader Hugo Chávez, Maduro has presided over huge opposition gains in the government while failing to capture his predecessor's popularity. The president declared a state of emergency last month to fend off calls for his removal, and his political future seems uncertain.
The WorldPost spoke with Alejandro Velasco, an author and associate professor at New York University, to discuss what led to the current crisis.
Venezuela has had previous periods of economic downturn, but how has the current crisis gotten to this point?
There are both historic and more contemporary reasons for it. The historic, more structural ones have to do with Venezuela’s long-term dependence on one resource commodity, which is oil.
In times of oil booms, Venezuelan governments go on spending sprees that don’t really generate into productive domestic industrial sectors. That means the country has become dependent on imports. While oil money is flowing, you can buy whatever imports that you want, but when that oil money stops, you have much less resources to buy.
This is the pattern that we’ve seen in previous decades and we also saw it again in the decade under Chávez. Then, oil prices were really high, but there was little investment in the domestic apparatus and very high dependency on revenues to buy imported goods. That depleted the ability of Venezuela to really be self-sustaining.
The country has become dependent on imports.
The second factor is more contemporary, and is that the petrostate has been deepened considerably during the Chávez and Maduro years to expropriate large sectors of the productive economy. The idea was that a productive apparatus could emerge on the basis of state-owned and worker-operated enterprises. The trouble with that is that basically these companies, even though they were state-run, were competing against much better profit-oriented enterprises.
The third factor, which is probably the most significant at this stage to explain why the crisis is so deep, is the currency controls -- which were implemented in 2003 after an oil industry strike aimed at ousting Chávez. Currency controls are usually a measure that you take for a year or two at the most, because after that, it creates an incentive for corruption, and that’s exactly what has happened. It created disincentives for production, and incentives for purchasing, hoarding and then reselling the scarce goods that there are.
In what way are the food shortages and closures affecting people in Venezuela right now?
The most dramatic way is the lack of access to basically anything and everything. As shortages of domestic products increase, that means there's scarcer availability of products, ranging from flour to more manufactured products. That translates into very large lines as people try to seek out those products, and empowers the black market – which is incentivized by these currency controls. Shortages and extremely high, inflated prices on the black market are major ways that people are feeling it.
We’re seeing other ways as well. There’s a shortage of medicine, and we’re seeing shortages of parts for hospitals.
If you have access to dollars, then that means that you have access to the black market.
The one thing I would add is that it’s affecting different parts of the population disproportionately. If you have access to dollars, then that means that you have access to the black market and to stores in the wealthier parts of town that are still pretty well-stocked.
Most of the other products that have a regulated price set by the government are difficult to find, and when they are found, they’re highly rationed. You have days that are assigned to purchase them based on your national ID card, and this rationing process has the affect of changing how people manage their daily lives.
This may not be uniform, and class divides play a role in this, but how are people in Venezuela viewing the causes of the crisis?
There is no uniform approach. There is a very high level of rejection of the Maduro government, which largely owes to the severe crisis. People do blame Maduro, but they blame him for different reasons.
There are still very high levels of polarization in how people view the last 17 years, and especially the Chávez era. They view the current crisis through those polarized lenses.
I’d just like to make clear, it is certainly true that the government currently is at a very low level in terms of popularity -- which would tend to suggest there is no polarization. But where the polarization exists is in the causes that people give to the crisis.
People who were transactional Chavistas blame Maduro based on feeling that the policies he’s implemented have made him ineffective. Ideological Chavistas blame Maduro, but for being insufficiently left and socialist. Then there are a number of people who have always been opponents of the Chavista government.
There is no uniform explanation for where people ascribe blame; they do largely and significantly blame the government.
Do you think the Maduro government will be able to survive this crisis?
Well, the benchmark of survival is if he can finish out his term until 2018. I think the safe bet is no, so the question then becomes: Under what circumstances will Maduro not finish his term? My own sense is that with the slight uptick in oil prices is that the crisis, although it’s bad, has to some extent plateaued.
This has bought the Chavista government some time, which it has been using to delay the recall referendum beyond 2016. The reason that’s important is that if the recall referendum happens after December 2016, then whoever is the vice president has to fulfill the remainder of the term.
Maduro won’t survive, but that doesn’t mean that Chavismo won’t survive.
The major leverage that the government has with the opposition -- and this is a bit of a paradox -- is to stay in power. The opposition needs some figure in the government to continue in power in order to take the blame for the measures that are coming. These are going to be painful, difficult measures to bring Venezuela’s economy back.
The opposition doesn’t want to be left holding the bag.
Right, and my sense is that what sectors of Chavistas are mulling and negotiating with the opposition is that they’re happy to get rid of Maduro -- who is hyper-unpopular, even among Chavistas. Then, once the vice president stays on, this would allow for a tacit transition period that passes some measures and saves face before the opposition comes to power.
That’s my sense of how it’s playing out going forward. Maduro won’t survive, but that doesn’t mean that Chavismo won’t survive.
This interview has been edited for length and clarity.