CARACAS — On Feb. 14, Venezuelan President Nicolas Maduro warned his countrymen that the economic crisis they’ve been suffering through for months could last through 2017. He spoke not long after the supreme court approved his declaration of economic emergency, justifying his need for special powers.
What many doubt, however, is whether Maduro himself will be in power to witness an economic turnaround, as the pressures mount for him to step down or be pushed aside. “Maduro is facing a crisis encompassing economic, political, social and cultural factors,” said Caracas-based political analyst Dimitris Pantoulas. “It’s a perfect storm.”
And the president seems at a loss. A former bus driver who rose to become the country’s foreign minister and then vice president before succeeding the late Hugo Chávez in 2013, Maduro is beset by infighting within his own cabinet and divisions within his United Socialist Party of Venezuela (PSUV) that have left him scrambling to survive politically.
Maduro also faces a revitalized opposition calling for his resignation, soaring crime, a possible debt default, and now, water and power rationing exacerbated by El Nino. “The government is at the helm of a sinking ship, refusing to change course, and the opposition is content to stand by and let it happen,” says David Smilde, a sociology professor at Tulane University who has studied Venezuela for over 20 years.
Even though the president raised domestic gasoline prices 60-fold on Feb. 17 while devaluing the country’s currency by 37 percent, he also raised the country’s minimum wage and pledged to revise prices on goods and services set by the government. But he forecast no easing of government control over the economy, hinting that it would only increase. Those measures “will do nothing to resolve Venezuela’s problems,” Luis Oliveros, an economist at the Central University in Caracas, said in an interview. “They will cause more inflation, and more distortions.”
Maduro has only himself to blame. For the past two years, he has promised to overhaul his government’s economic policies to deal with crushing shortages that have turned toilet paper and hand soap into luxuries, and soaring inflation that has given Venezuela the dubious honor of boasting the world’s highest inflation rate.
It all could have turned out differently. On March 15 of last year, the outgoing assembly, where the PSUV held a majority, granted Maduro the power to rule by decree, effectively allowing him to implement new laws without congressional approval. But Maduro failed to enact any economic changes, fearful of the political repercussions that a currency devaluation or cutbacks in social spending would unleash. That inaction led voters to punish Maduro and his party in December, when the opposition won a crushing victory in legislative elections, giving them control of the National Assembly for the first time in nearly 17 years.
Hoping to blunt opposition initiatives, Maduro asked the new assembly to grant him emergency powers to right the economy. Its members refused, but their decision was overturned last week by the Supreme Court, where PSUV partisans hold a majority. That body ruled that Maduro didn’t need legislative approval to declare an emergency. And so emergency it is.
Maduro now has 60 days to take steps to right the economy. Oliveros and others maintain that the only way to resolve the country’s economic woes is to dismantle state control over prices, foreign exchange rates, and to cut subsidies and social spending, all of which Maduro refuses. Instead, he seems to opt for greater state control.
“We have to regain this country and remake its production, distribution, and retail systems,” Maduro said in a televised address on Feb. 12, arguing that greater government control was essential to blunt an “economic war” allegedly being waged against his government by the country’s business elite, and exiles in Miami and Spain.
Almost everyone agrees that Venezuela, which has been unable to develop what are the world’s largest oil reserves, is in deep trouble. Economists forecast that inflation could top 700 percent this year, and that the economy could shrink by an additional 8 percent after last year’s 10 percent contraction.
The country’s currency, the strong bolivar, now trades at more than 1,045 to the dollar on the black market, in stark contrast to the official exchange rate of 10 bolivars to the dollar. Production of crude — which accounts for about 95 percent of the country’s hard currency revenue — continues to fall, and the state oil company is slashing investments to save funds. And staring the country in the face is more than $13 billion in debt payments this year that have raised fears of a default that would cut Venezuela off from capital markets.
Angela Munoz, a 52-year-old housewife in the town of El Consejo, has had enough of Maduro and his promises. She wakes up at 4 a.m. every morning to be among the first in line outside her neighborhood supermarket in hopes of buying hard-to-find items like corn meal, flour, laundry detergent, or coffee. She often wakes up to find the water to her apartment has been cut off, thanks to Venezuela’s ongoing drought.
After spending her day looking for food, she hurries home before 6 p.m. to avoid the thugs who live in her neighborhood. She and her neighbors only have police protection until late afternoon, when the security forces withdraw. The police claim that they can’t defend themselves, let alone the community, against better-armed gangs.
Munoz can no longer find medicine for her 75-year-old mother, who suffers from hypertension and diabetes. Now, she fears that the government has done nothing to confront an outbreak of the Zika virus in her town. Her husband can’t use his motorcycle because he can’t find spare parts.
“Just when I think life can’t get any worse, it does,” Munoz moaned. “I had hoped things would get better when the opposition won control of the assembly. I thought that Maduro would have to work with them to find solutions. It’s obvious that he only wants to stay in power, and we have to suffer the consequences until he is replaced.”
Venezuela’s opposition coalition, the Democratic Unity Round (MUD), has set a deadline of six months to force Maduro peacefully from office, either by a recall referendum or constitutional amendment that would shorten his term, which is currently due to end in 2019. “There is a huge majority who want change,” opposition leader and Miranda State Governor Henrique Capriles Radonski warned on Feb. 17. “This is a crisis that is accelerating each day and the government doesn’t want to do anything to change it. Our only option is to change the government.” Capriles, who lost narrowly to Maduro in a special election in 2013, says the opposition should pursue both routes — the amendment and the recall, both — to ensure Maduro’s removal.
But the MUD has moved carefully, especially after the Supreme Court ruled that three opposition legislators couldn’t take their seats, while it studied allegations of voter fraud.
Those three lawmakers would have given the opposition a two-thirds majority, sufficient to rewrite laws, replace ministers, and recall Maduro. The court hasn’t said when it will make a final ruling on the trio. In the meantime, they are waiting to see what the court rules, and may have to run again in a special election.
While the court dithers, the assembly has been concentrating on smaller projects: granting property rights to recipients of government housing, raising pensions and benefits, and freeing political prisoners, while pressing the government to advance its economic proposals. The opposition is letting “the government stew in its own juices,” Smilde said. “The opposition is essentially letting the government spend what political capital it has resisting change, in order to push for an end to Maduro’s presidency.”
The fear of a social explosion may result in an internal coup against Maduro, as PSUV activists and the military high command seek to protect their positions and the riches they have accumulated under 17 years of chávismo, the social, political, and economic movement created by Chavez that sought to redistribute the country’s oil wealth but according to the government’s dictates. “Maduro may be offered up as a sacrificial lamb, [replaced by a] new leader put in place by the PSUV,” Yorde said. “A new government then might try to work with the opposition in a unity government.”
Whatever happens, change can’t happen too soon for Munoz.“I can’t imagine any changes being worse than what we have right now,” she said. “It’s time to turn the page.”
Monday, February 22, 2016
Saturday, February 20, 2016
Friday, February 12, 2016
21st Century Socialism - How to go from 44% of Households Living in Poverty in 1998 to 73% in 2015 (and Rising!)
Venezuelan President Nicolas Maduro has become known for the ludicrous assertions uttered during his broadcasted speeches. During the 2013 presidential campaign (which he won by a thin margin and under a strong suspicion of rigging), Maduro stated that the late leader of "21st Century socialism," his mentor Hugo Chavez, appeared to him incarnated in the body of a bird. He subsequently declared that every time he looks at the mountains surrounding Caracas, he sees Chavez in one of them.
Add to this the fact that Maduro once said that he did not doubt "a millimeter of a second" whether he should join Chavez's socialist movement, and everyone can understand why Venezuelans often find good reason to mock their president whenever he takes to a microphone.
It must be said that Chavez's heir-designate is not the only one, among his party fellows, to excel in the realm of incongruity. The newly appointed economy minister, Luis Salas, contended, despite the country's skyrocketing inflation rate, that inflation actually does not exist. Venezuela's attorney general, Luisa Ortega Diaz, for her part, read a speech at the National Assembly (the country's Parliament) in which she solemnly referred to France's 19th century writer Victor Hugo as a "Nicaraguan poet." As regards former Vice President Jorge Arreaza, he declared that Chavez's miracles are so evident that they do not need confirmation by the Vatican.
There is one domain, however, in which President Maduro's dumbness has no match. That realm is the economy.
Smothering price controls, unrealistic official exchange rates, lavish money printing, and criminalization of the entrepreneurial class, all characteristics inherited from Hugo Chavez, have continued to be applied with frantic fervor by Nicolas Maduro. Little wonder that Venezuela's economy is on the verge of collapse.
Research undertaken by three renowned academic institutions of that country indicates that 73 percent of households were living under the poverty threshold in 2015, up from 44 percent in 1998, when Hugo Chavez assumed power.
Venezuela has been at the top (or the bottom) of Bloomberg's misery index for two consecutive years, 2014 and 2015. The situation is bound to get worse, as the International Monetary Fund forecasts an 8 percent drop of gross domestic product in 2016, after two consecutive years of decline (4 percent and 10 percent in 2014 and 2015, respectively).
Venezuelan inflation, the world's highest, reached 275 percent in 2015 and is expected to rise to 720 percent in 2016, according to the IMF.
Little wonder that Chavismo received a thrashing at last December's parliamentary elections, with the opposition gaining an overwhelming majority of seats in the National Assembly.
After that defeat, Maduro had to admit what he had stubbornly denied until then, namely that Venezuela is facing "a crisis of great proportions."
The problem is how to overcome that crisis. President Maduro refuses to move away from the anti-market policies that have sunk Venezuela's economy. Instead, he blames the entrepreneurial class (the "damned bourgeoisie") for the economic disaster and keeps taking inconsequential initiatives that would have no positive impact on the country's predicament.
Thus, Venezuela's oil minister, Eulogio del Pino, recently went to Russia and the Middle East to try to secure a "coordinated action" by oil producers aimed at restricting production and thereby raising the historically depressed price of that commodity, which accounts for 96 percent of Venezuela's total exports.
To think that the time is appropriate for a diplomatic move of this kind shows a poor grasp of the interests at stake among leading oil producers.
Indeed, now that economic sanctions against Iran have been lifted, Tehran is doing its utmost to expand, rather than curtail, its sales on world markets. The same applies to Russia, which needs as much foreign exchange as possible to fight recession and fund its military adventures in Syria and Ukraine. As regards Saudi Arabia, the key oil exporter, it will naturally be unwilling to cut its production so long as Riyadh senses that such a move would enable its geopolitical rivals Iran and Russia to nibble away at market share.
The most that Maduro can obtain under the present circumstances would be some polite reactions from oil-producing partners and, eventually, a window-dressing agreement condemned to remain dead letter.
Let us assume, however, that oil-producing countries do accept to cut their production levels, and that oil prices take an upward ride.
Such a price increase would enable shale oil producers in the United States, a major oil producer, to resume the exploitation of fields that are not profitable enough to compete amid depressed oil prices.
The expansion of shale oil production would in turn increase the overall supply of oil and, accordingly, would act as a brake to any price rise of this commodity.
Aware of the gloomy oil market outlook for the months and even years ahead, and ready as usual to make flamboyant announcements, Maduro recently asserted that the time has come for Venezuela to move away from its century-old "oil rentier economic model" (i.e. Venezuela's dependence on oil exports).
Never mind that Maduro's mentor, Hugo Chavez, boosted Venezuela's dependence on oil more than anyone else before him had done. Indeed, Chavez's expropriations, price controls, and other hostile measures against the entrepreneurial class brought about the destruction of the non-oil sector of Venezuela's economy.
In fact, Chavez himself used the expression "oil socialism" to characterize the system he had put in place.
The comical elements in Maduro's new narrative did not wait too long to burst on the scene. To depart from the "oil rentier model," and in particular to overcome food shortages, Maduro has put forward what is becoming the new flagship measure of his government: the promotion of "urban smallholdings."
To encourage his fellow citizens to follow through, he said that his wife and he were already breeding 50 egg-laying chickens in the presidential house.
Hugo Chavez had promised to transform his country into a leading power in world affairs, in petrochemical production, and in the military and aerospace domains. Now, Maduro has nothing to offer but to ask Venezuelans to grow chickens and plant beans in their courtyards. This is quite a comedown for a 21st century socialism that had dreamed of outperforming capitalism.
Tuesday, February 9, 2016
PUERTO CABELLO, Venezuela — In the capital, water is so expensive and scarce that residents wait for hours with bottles at the side of a mountain where it trickles out onto the highway.
In the countryside, sugar cane fields rot, and milk factories stand idle, even as people carry bags of money around to buy food on the black market in every city and town.
And here in this port that once fed a nation, everything looks bare. Where a dozen ships once waited to enter, only four could be seen from a hilltop fort built long ago to guard against raids from the sea.
No one would pillage Puerto Cabello today. There is nothing to take anymore.
And it is all about to get much worse.
Inflation is expected to hit 720 percent this year, the highest in the world, making Venezuela reminiscent of Zimbabwe at the start of its collapse. The price of oil, this country’s lifeblood, has collapsed to lows not seen in more than a decade.
For the last month, I have been writing about Venezuela every day, chronicling its people, politics, language, quirks and culture through the eyes of a correspondent who moved here just as this country was heading deeper into economic disarray.
It was a project where fleeting moments carried the story: shouting matches during the first session of Congress; soldiers at the tomb of President Hugo Chávez, who died in 2013; letters from expatriates who had left Venezuela because of crime and longed to return.
As I wrote about everyday interactions and exchanges, some themes became even more apparent. In Venezuela — a country where hospitals already lack syringes, supermarkets struggle to stock basic goods, and the government has declared an economic emergency while sitting upon the world’s largest reserves of oil — the strains just keep growing.
I visited a fish farmer who, after the fish feed ran out, resorted to grinding up beans and sugar cane, throwing them into a pond and crossing his fingers. (He got small fish.) I wrote about the bundles of cash needed to buy some coffee and water; a store that sold only broken toys; and the enduring loyalty of Mr. Chávez’s supporters.
With the photographer Meridith Kohut, I traveled across the country on what seemed, to many, the eve of a disaster. It showed in the faces of the people along the journey, 1,200 miles in all, starting at the coast, winding through the Andes and finally dropping down into Venezuela’s vast but dying agricultural plains.
Down the hillside in Puerto Cabello, a line formed in front of a grocery store, with hundreds of people looking for food. Many had arrived at 5:30 a.m., when rumor had it that a delivery truck had reached the store. At a quarter past 10, a policeman with a pistol monitored the door, letting in a dozen at a time.
The day before, there were beans, flour and milk for sale.
This morning, there was only cooking oil.
Ecio Corredor, who stood in line, said he lost his job in November. Ironically, he said, he used to drive the goods from the docks to the supermarkets.
“There are no more shipments now,” he said. He mumbled to Carlos Perozo, another driver, who said he had been out of work for a year because of a dead car battery. He could not find another, and could not afford one if he did.
“Be careful,” Mr. Perozo said. “Someone will come for yours.”
Palm trees lined an oil refinery. “We Are All Chávez,” was painted on the side of the facility.
In Morrocoy, the road ended at a pier. A boatman took us through a mangrove swamp that ended in a white sandy beach where Eduardo Vera and his wife, Carolina Morillo, had taken their baby boy for vacation.
The couple, once in the middle class, now survive on two salaries that have depreciated to the equivalent of $2.19 a day. They both have side jobs. “We can live, but not comfortably,” Ms. Morillo said. The vacation was a final splurge.
The two, in their 30s, wonder about having another child, though it seems impossible to them now.
“We can barely find diapers or milk for José Antonio,” Mr. Vera said of his son. But one can hope for better times, he said, adding, “We want to get to know Disneyland one day.”
From the coast, we started inland, a journey that began with the discovery of black gold. Not of oil, of which there is plenty in Venezuela, but of black beans. There are almost none in this country.
Few producers make them anymore for the fixed government price. Octavio Medina bought them for 50 times that price and still sold them for an additional markup on the street. He says dozens of people buy bags, priced at half a day’s work at minimum wage.
We began heading into the Andes. The highway narrowed and curved up the steep edges of rocky roadsides.
“Are you here to cover the news?” a soldier at a checkpoint asked.
“What news?” we asked.
“The kidnappings,” he said. Ransoms are a business across this country.
Mérida sits between two high sets of mountains, a picturesque Andean university town. A cable car, said to be the world’s highest, once offered sweeping views of the valley. It now lies broken.
Frank Tirado ate in a restaurant with a wide smile and an innocent way of talking that belied the fact that he had just passed through some of the most difficult months of his life. He showed us a scar on the side of his head from recent brain surgery.
Several months ago, he started having headaches and losing his vision. His neurologist told him he had a brain tumor. If he did not have an operation soon, he would be paralyzed.
But the waiting list at the public hospital was more than a month, too long to survive.
A private practice could treat Mr. Tirado immediately, but only if he could pay. Two aunts in Florida wired him the money, he said. Mr. Tirado clutched a Christian prayer book and marveled at his luck to have had family earning dollars abroad.
Before leaving town, we made a stop at the cathedral where Vladimir Gutiérrez sat on the steps begging for change. He pulled a loaf of bread from under his shirt. His collection, 50 bolívars, would not be enough for a new one.
He showed fresh wounds from a recent knife fight that he said began after a man grabbed his daughter. “But I got him, too,” Mr. Gutiérrez said.
He seemed unworried by what lay ahead. He had hit the bottom long ago.
The road from the Andes spilled into Los Llanos, Venezuela’s agricultural heartland. Rodolfo Palencia, a rancher, spent an afternoon on his hammock, singing us songs he wrote about his state of Barinas, the most fertile part of his country, according to the lyrics.
But the ballads describe another time. Mr. Palencia took us to a field of sugar cane that was 10 feet high, and dead. The nearby sugar mill, built by the government in the early 2000s, could not process the cane this year, he said.
Fields where beans grew were fallow; there had been shortages of fertilizer this year, too. As far as the eye could see, we were surrounded by tall weeds.
And the milk. There is none there either, especially not at La Batalla, an operation that once produced 126,000 liters between three factories annually a decade ago.
It was nationalized, and its factory in La Sabaneta is now an empty outpost. The only employee is a watchman who opened the gate. The gauges on the pumps were unreadable. The cooling system had rusted open. There were bats here.
“Total loss,” began Alirio Alvarado, looking up from an agricultural pond where he once farmed a fish called cachama. Two thousand ponds are in this area, and farmers say they are mostly empty now.
It was Mr. Alvarado who put his own sugar cane and beans into his pond. The fish grew only to half the normal size. Then he ran out of beans.
“You might have said I should have sold the beans so people could eat them, but I had no choice,” he said.
A few miles away, Mr. Palencia, the rancher, took us to the factory that was meant to supply feed to the fish farms.
This place was never abandoned, because it was never opened, farmers said.
Inside, thousands of dollars of unused equipment sat rusting. An operating manual was unopened in a Ziploc bag. Receipts lay scattered on the factory floor from a German company named Andritz Feed & Biofuel.
“What a waste,” Mr. Palencia said.
A few moments later, a watchman appeared, startled that we had entered. He asked the rancher what his business was there. Mr. Palencia did not answer, turning to me instead.
“If we were run properly, this country could be richer than Saudi Arabia,” Mr. Palencia said.
He could barely contain his anger, at a loss for whom to blame. Was it Mr. Chávez, dead since 2013? Was it the curse of oil dependence?
Or was it the watchman who had only now shown up?
“I should report you,” said the rancher, pointing a finger.
“Don’t accuse me,” said the watchman.
“You aren’t even watching over this equipment,” said the rancher. “Someone could steal it. You do nothing.”
“I’m barely paid; you don’t understand,” said the watchman.
But it was too late. Mr. Palencia had walked away.