In Venezuela, the economy may do what the opposition couldn’t
CARACAS, Venezuela: The autocratic government of President Nicolás Maduro is sharply intensifying its crackdown on dissent, issuing arrest warrants for rebellious mayors, targeting unfriendly politicians and menacing average citizens who speak their minds. Yet if it’s enemies of the state Maduro is after, one threat looms larger than any other.
That would be the flatlining Venezuelan economy.
This South American country is edging toward the economic brink after an internationally condemned election last month created an all-powerful congress loyal to Maduro.
Since the July 30 vote, the value of the local currency, the bolívar, has fluctuated more wildly than ever, a significant feat for a country saddled with the world’s highest inflation rate. As a result, street prices for staples like bread and tomatoes have doubled in less than two weeks.
New estimates from the large Venezuelan data firm Ecoanalítica suggest that the economy could shrink 10.4 per cent this year, exacerbating a four-year nosedive that some economists already call worse than the United States’ Great Depression.
Potentially more dangerous, analysts say, is the prospect of a sovereign debt crisis that could bring the country to a whole new level of economic pain.
The deteriorating situation is sending a fresh jolt of panic through crisis-hardened Venezuelans, who are increasingly blaming Maduro.
“It was after the vote that things went out of control,” said Miguel Gonzalez, a 94-year old retiree in sticker shock this past week while shopping at a Caracas grocery store. In only a few days, he noted, the price of white cheese had jumped 21 per cent, while stewing meat surged 31 per cent. Like many other shoppers, he had a near-empty cart.
The government normally adjusts pensions and the minimum wage to compensate for inflation. But in a possible sign of empty coffers, it hasn’t done that yet.
As anxious Venezuelans bought up US dollars in the week after the vote, the local currency depreciated 45 per cent against the dollar. In the past week, the bolívar clawed back lost ground but price increases on the street remained in place.
“It’s the government’s fault,” Gonzalez said bluntly before leaving the store with only a bag of potatoes. Nearby, 62-year old Margarita Rivero, who lives on the equivalent of US$15 a month, sounded a note of despair. A kilo of meat - 2.2 pounds - now costs about US$2.50, or 16 per cent of her monthly wage.
“God save us,” she said. “We will all disappear if we keep going like this.”
Venezuela has sunk into financial malaise on the back of a socialist experiment launched by Hugo Chávez, the leftist firebrand who died in 2013 after nationalising gold mines and rice mills, among other enterprises, and bringing more of the energy sector under state control.
Since then, the economy has suffered a far more profound collapse under Maduro, Chávez’s anointed successor, the result of plummeting oil prices, mismanagement and failed economic policies including price and currency controls.
Yet after a four-month-long street uprising in which more than 100 people were killed and thousands arrested, the opposition appears fractured and in disarray.
Analysts say Maduro’s longevity in office may now depend less on surviving an opposition challenge than on his ability to sidestep a catastrophic debt crisis. — WP-Bloomberg