No glorious revolution in post-Chavez Venezuela
CARACAS, Venezuela — Jose Hernandez is fighting mad.
Standing at the tail end of a long lineup to buy a few kilograms of sugar, the 66-year-old pensioner shouted Venezuelans had once been slaves to Spain but were now slaves to the Venezuelans who governed them.
“Our rulers have been mugging us,” he said. “They hide food and medicine from us. Armed groups won’t let us be in the streets after 6 p.m. It is horrifying what we live through in this country.”
Hernandez was giving voice to what millions of Venezuelans think as they wait for hours to buy meagre amounts of staples such as toilet paper, corn flour and cooking oil. Runaway inflation has driven the price of other products beyond the means of many.
The grave economic problems that have confronted Russia and Iran since global oil prices were sliced in half over the past year have received a lot of international attention. Far less has been heard about Venezuela’s far more dire economic predicament — nearly 95 per cent of its economy is based on oil.
The most obvious consequence are hundreds of Soviet-style lineups that form every day in Caracas, under the watchful eye of police armed with assault weapons and walls covered in political graffiti.
Dozens have died in political violence and civil order appears to be crumbling amid a crime wave so serious visitors are warned to take taxis even when their intended destination is only one or two blocks away.
Venezuela may have the world’s largest proven oil reserves, but that is of no help. The numbers testing President Nicolas Maduro, the hapless hand-picked heir to Hugo Chavez’s no longer so glorious revolution, are stark. Inflation is expected to grow by more than 200 per cent this year as gross domestic product shrinks by seven per cent to 10 per cent, and oil revenues plummet by about $16 billion US.
Meanwhile, Maduro’s socialist government, which came to power after the charismatic Chavez died of cancer two years ago, must repay $12 billion to foreign creditors by the end of the year. Another $16 billion comes due in 2016.
“It is such a mess I cannot imagine what our political future might be,” said economist Francisco Faraco, 74. “The government may be able to pay the debt this year, but it won’t be able to do it next year if the price of oil stays where it is, unless our people have nothing to eat. It will become very difficult to get food, medicine, auto parts. In many cases it already is.”
Chavez won over the poor by lavishing large amounts of oil money on them. There was improved health care, hundreds of new apartment blocks and higher salaries to spend on consumer goods. But he failed to diversify the economy, build much new infrastructure, or put aside any money so there was no cushion when the price of oil crashed.
Venezuelans now deal with four different exchange rates. For some basic necessities and medicine, the official rate is 6.3 bolivars. There is a second rate of about 12 bolivars to the U.S. dollar for some other goods, including medical supplies, a third “free floating” official rate of 177 bolivars, established last month to try to rein in currency speculators, and a current black market rate of 281 bolivars. Faraco reckoned the U.S. dollar is set to quadruple in value against the bolivar by year-end.
The tumult in the currency market has led to sensational stories such as how a box of 36 U.S.-made condoms cost $755. But visits to Caracas pharmacies this week found no condoms available at any price. If they were, purchasers with U.S. dollars would only pay about $8 a box.
Using the same crazy arithmetic, two kilograms of mandarins cost about $15.87 at the lowest official exchange rate, about 35¢ if paid for in U.S. currency.
Most strikingly, oil sells for three bolivars a litre — about 45¢ at the official exchange rate, only slightly more than 1¢ at the black market rate.
The minimum monthly wage is 5,600 bolivars — nearly $900 at the lowest official exchange rate, only $20 on the black market.
Strict price controls have kept the official price of staples low for Venezuela’s 29 million citizens, but such goods are scarce. As in every economic calamity, some people are hoarding and becoming black marketers. Maduro has condemned such traders as thieves and threatened them with harsh penalties.
A 22-year-old single mother who asked to be called Katiuska Gonzales is one of the black market traders. Sitting in her parents’ modest home in one of Caracas’s many hillside slums, she said the 4,200 bolivars she earned as a cashier was not nearly enough for her and her two daughters to survive. She spends hours hunting for good lineups to join and waits for up to seven hours to buy items she can resell.
Surveying her stash of diapers, cooking oil, corn flour, detergent, shampoo and coffee, Gonzales said powdered milk was the most coveted product because it was the hardest to find. It could be resold for 700 per cent profit, compared to 300 per cent for sugar and 50 per cent for butter.
“I blame the government for this,” she said. “Why do they all have the things that we don’t have? They are the first people in this country to be corrupt, not me.”
Police are also in on the scam, demanding she pay a daily “fee” of 500 bolivars to sell her goods “on certain streets,” reducing her monthly profit to about 4,600 bolivars. Despite such police protection, several friends had been arrested for re-selling goods for a profit.
Asked about the price and scarcity of condoms, Gonzales laughed.
“I heard about that and birth control pills, too. But they are not a necessity,” she said. “People don’t search for them like they do for food. I will have to do this for a long time because this situation is getting worse and worse, not better.”