The position of President Nicolás Maduro’s government in Venezuela is looking increasingly precarious in the face of a worsening economic crisis.
Shortages of basic items, such as milk, meat, corn flour (an important staple) and, tellingly, toilet paper, are the order of the day and long queues are a common sight on the streets of Caracas and in other parts of the country. Those who remember the hard times here of the late 1970s and 1980s would have been able to warn Mr Maduro and company, some time ago, that they are in a literal mess.
Many observers believe it is a mess of their own making. Mr Maduro and senior officials, however, blame the Venezuelan right for the shortages and the lines and “agents” of the United States of America for sowing the seeds of economic collapse, in order to undermine the “economic war” the government claims it is waging against long-entrenched vested interests.
But it is another ‘war’ that has worsened the crisis in the Bolivarian Republic – the oil price war, for which the Venezuelan government is also happy to blame the USA, which it accuses of pursuing a strategy to break Russia and hurt Venezuela at the same time. With Venezuelan crude dropping, for the first time since 2008, to less than US$40 per barrel at the end of last week – a fall of 60 per cent – and with no sign of significant improvement in the offing, the country’s economic difficulties are multiplying.
Following a two-week tour to Russia, China and four OPEC members, which bore little fruit and failed to secure a rise in oil prices, Mr Maduro announced, on Wednesday, measures aimed at addressing the economic crisis, including a new complex three-tier model of exchange controls, which brings the bolivar closer to devaluation without actually calling it that. As reported in this newspaper yesterday, this could add to pressure on Venezuela’s giddy inflation rate of 64 per cent in 2014.
The IMF, moreover, is forecasting that the economy will contract 7 per cent this year and although Venezuela has the largest petroleum reserves in the world, the markets are reflecting growing concern that Venezuela could default on its international obligations, with Moody’s lowering the category of Venezuelan debt to the level of “high risk” which makes external financing more expensive.
There is an additional factor undermining the international standing of Mr Maduro’s government: the perception that Cuban support has diminished. The news that Cuba and the USA had been negotiating the re-establishment of diplomatic relations over the past year and a half seemed to have come as a complete surprise to Venezuela, supposedly Cuba’s closest ally. It would now appear that Cuba is, as ever, focused on charting its own destiny and is, furthermore, preparing for a future without Venezuelan oil subsidies – a development that Caricom countries dependent on PetroCaribe oil would do well to study.
Mr Maduro’s Wednesday speech to the National Assembly suggests that his back is well and truly against the wall and there is a growing sense that the economic difficulties, public insecurity and agitation by the opposition are fuelling political uncertainty and that something has to give. The chavista rhetoric would seem to confirm that the government itself shares this perception, with official statements suggesting that if there are civil disturbances, its followers would be ready to sacrifice themselves to defend the ‘Bolivarian revolution.’
More worrying for Mr Maduro, whose popularity has dropped to 22 per cent, according to one leading pollster, are rumours of a conspiracy, involving elements of the military and his own United Socialist Party of Venezuela (PSUV), aimed at replacing him with the President of the National Assembly and de facto number two of the chavista regime, Diosdado Cabello. Indeed, the current crisis has highlighted fractures within the government that would have been inconceivable under Hugo Chávez. On the left of the PSUV, there are claims that Mr Maduro is betraying the revolution. And on the right of the ruling party, there are those who favour Mr Cabello as having the capacity to re-impose economic order and regain the political ascendancy.
It may well be that internal disputes and ideological inflexibility have been, until now, preventing the government from taking bold, corrective economic action. It remains to be seen how far the recently announced measures will go towards arresting the downward spiral of the economy and appeasing a restless populace. There is no doubt, though, that chavismo is facing its toughest challenge since the death of its charismatic founder. And there is real fear, even among moderate opponents of the government, that any action that further destabilises it, whether on the part of the opposition or from within the chavista ranks, could lead to the type of political crisis, anarchy even, that would not be in the country’s best interests… or those of its neighbours, for that matter.
