While gas prices throughout the United States have caused college students to unanimously rejoice that, “My GPA is finally higher than the price of gas!” the people and economy of Venezuela don’t share quite the same sentiment as American college students.
The rapid drop in gas prices ($97 per barrel to less than $40 per barrel in Venezuela, in less than a year), in addition to the continuation of civil unrest that started after the death of Chavez, as well as a bad fiscal policy that has plagued Venezuela for several generations, are all contributions to the dire economic straits Venezuela now finds itself in.
During the oil boom of the past decade, Venezuela depleted, rather than saved the massive profit it made from the commodity. Because of this, Venezuela has an extremely small amount in reserve, (compared to other countries with oil-heavy economies) and has been given a Caa3 international credit rating by Moody, a rating usually reserved for countries about to declare bankruptcy. This rating and lack of savings has cut Venezuela off from the international credit market, which is dangerous for a country that relies on imports for over 70% of all consumer goods (including food), and where oil constitutes over 95% of it’s foreign exchanges.
All of this means half-empty grocery stores, far less diversity of available goods, longer lines for the goods when they are actually available, and even occasional looting at supermarkets. The farther away from the capital of Caracas one journeys, the worse these problems get. At this point, it wouldn’t be out of line for one to see armed guards at super market doors in Caracas, ready to arrest those who try to take more than they have been rationed.
President Maduro of Venezuela, the successor of Chavez, has recently returned from a global tour of supplication to his allies for a fiscal bailout. China, Russia, Iran, Qatar, and Saudi Arabia were all uneasy to drive up oil prices, as Maduro suggested, although Russia and Iran seemed to be marginally interested. (At this time, no action has been taken on that front.) Maduro returned with promises from China, Qatar, and Russia, but Qatari and Russian amounts remain vague, and China’s 20 billion pledge comes with conditions, as China is interested in taking over some Venezuelan industries.
Maduro has some hard decisions to make- the option of going to the International Monetary Fund, which could potentially rescue the Venezuelan economy, means Maduro would have to establish a new relationship, due to the fact that Chavez cut off Venezuela’s relationship with the IMF in 2007. Chavistas would find IMF interference within Venezuela completely unacceptable, and as of right now, makes that an option Maduro isn’t even willing to consider.
For the same reason, any advice or offers of assistance by the US or any of its allies or institutions would not be taken. Even advice from the president of Chile, given on a recent trip to Venezuela, was rejected by the administration. At this point, a frustrated populace wants food, and other basic consumer necessities, and they don’t care if it comes from an unpopular source. The government elite are the ones that are more difficult to convince. But they’re not the ones being rationed.
Any sort of economic reform is most effective when elements of government and society are in agreement. However, this agreement isn’t reality in Venezuela, due to the current political climate. While the opposition has grown more polarized and outspoken, especially after the Venezuelan Supreme Court ruled that one-half is equal to two-thirds, allowing the government to continue to appoint loyal Chavistas to the legislature, clearly violating the Venezuelan Constitution, and confounding all previous mathematical principles. This continues to contribute to the lack of legitimacy surrounding Maduro’s presidency, many Venezuelans seeing his rise to power has something akin to nepotism, having been groomed by Chavez for so long.
The future of Venezuela, at this point in time, appears bleak indeed. With a government unwilling to explore options that will anger Chavistas (pretty much everything seems to anger loyalists), it is the people of Venezuela who will be the true victims.