Meltdown Venezuela: the current crisis explained

With the world’s highest inflation rate of 180%, widespread lack of food and basic goods, sporadic energy shortages, violent rioting, and ongoing conflict between its political figureheads, its safe to say Venezuela resembles a country in the grip of its final death throes.

Just last week, and with the backing of the Supreme Court, Venezuelan President Nicolas Maduro declared a countrywide 60-day state of emergency designed to give him additional powers, such as the ability to impose harsher security measures, to use where he deems necessary.

While Maduro rationalizes the nation’s current failings as the result of a sinister plot against him and his socialist government by right-wing opposition forces, business elites and foreign powers, like the United States, groups on the other side of the playing field provide a differing account.

Venezuela’s opposition parties, which hold a majority in the government’s legislative branch, the National Assembly, have continuously blamed Maduro for the crisis and recently called for a recall referendum to remove him from office.

President Nicolas Maduro (left) speaking with Vice-President Aristobulo Isturiz. Source: Reuters

Wherever the blame lies, the causes behind Venezuela’s meltdown are multifaceted.

For one, and perhaps unsurprisingly, global drops in the value of oil have played a huge part in the economic collapse of a country for which the resource provides 95% of export revenues.

Whereas a single barrel of Venezuelan oil was worth around $88 in 2014, as of May 13th of this year, that same barrel amounts to a mere $35 in returns.

This proves particularly problematic for the wellbeing of the country’s citizens, at least a million of who benefitted from social programs instituted by the late Hugo Chavez, who served as Venezuela’s revolutionary socialist President between 1999 and 2013, and which were financed by oil exports.

While many in the country would recount the days of Chavez with positive nostalgia, it is true that some of his policies, seemingly implemented with good intentions, have in fact exacerbated the current crisis further.

In 2003, for instance, Chavez introduced a form of price controls on various basic goods with the hope of making items such as milk, rice and flour affordable for the poor.

Consequently many producers of such products claimed having set prices that they could not exceed resulted in them operating at a loss and forced some to stop production altogether.

As a result, Venezuela became heavily reliant on imports to supply food and basic goods for its citizens.

With the fall of oil, Venezuela has been left with an incredibly weak economy that simply doesn’t have the funds to import everything its population of 30 million requires.

People wait to buy bread in San Cristobal. 2014. Source: Carlos García Rawlins/Reuters

City streets are now regularly lined with droves of people queuing for hours at supermarkets, some under military supervision, for the subsidized essentials.

Public discontent is widespread. Between January and April, the Venezuelan Observatory of Social Conflict recorded a total of 2138 protests occurring across the nation, alongside nearly quadrupled looting figures.

Inflation and Venezuela’s complex exchange rate system has reportedly led to prices skyrocketing and, perhaps out of desperation, some people turning to hoarding goods to sell at a profit either in Venezuela or across its borders.

To combat this, Maduro ordered the closure of some crossings with Colombia in 2015.

Despite the clearly dire situation prospects for damage mitigation and recovery are hampered by the frayed relationship between Maduro’s United Socialist Party of Venezuela and his political opponents.

When opposition parties submitted a petition with 1.85 million signatures requesting a referendum to oust him, Maduro and Vice-President Aristobulo Isturiz promply dismissed the document as “fraudulent”.

These parties, which initially won a parliamentary majority in December on a campaign promise to remove Maduro before the end of his term in 2019, also rejected the legitimacy of Maduro’s state of emergency decree.

At this point, a lack of cooperation between Venezuela’s executive and National Assembly leave the country’s future in pockmarked and uncertain terrain.

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