Venezuela: Inflation, Shortages, and Increasing Violence
The descent of a democratic, oil-rich nation
Key Actors:
- Hugo Chávez – former president of Venezuela, in power 1999-2013
- Venezuelan government – led by Nicolás Maduro since 2013
- Leopoldo Lopez – unofficial head of the opposition against Maduro’s government
How did it begin?
Venezuela’s economy is dependent on oil, as oil revenues make up 95% of all export earnings. High oil prices therefore means high earnings for the economy. During Hugo Chávez’s presidency (February 1999 – March 2013), he used much of that money to finance social programmes with the goal of reducing inequality and poverty which, according to government figures, were a success. He also introduced price controls to make goods more affordable to the poor and took control of the foreign currency exchange.
In 2014, however, oil prices dropped sharply. The government was forced to cut back on social programmes on which many of the poor relied. In addition, the price controls led companies to lose their profit margin and go out of business, and a lack of foreign currency made importing difficult. This led to shortages in items such as flour, medicine, and toiletries.
Furthermore, inflation rose as the government printed more money and increased the minimum wage in a desperate attempt to regain popularity with the poor. The government’s inability to get credit after not repaying certain government bonds and a lack of creditors’ investments also contributed to inflation. In 2017, the inflation rate reached 536.2% and is estimated by the IMF to reach 2068.5% this year.
Before Chávez’s death in 2013, he picked Nicolás Maduro as his successor. However, since Maduro’s rise to power, he has been accused of mismanaging the country and of turning the democracy into an authoritarian rule through censorship and the military.
The shortages, inflation, and oppression have led to mass emigration as well as anger and revolt from Venezuelans, especially students and those of the middle class. Crime and violence have become widespread – according to the independent group the Venezuelan Violence Observatory, 27 479 people were killed in 2016 alone. Ever since 2013, an opposition movement against the government led by Leopoldo Lopez has been gaining support.
Who is Leopoldo Lopez?
Leopoldo Lopez is a politician, the co-founder of the Primero Justicia political party, and the coordinator and leader of the Voluntad Popular political party.
On Venezuela’s Youth Day in 2014, a peaceful protest started by Lopez turned violent when the opposition and the police stepped in. Three protesters were killed and many injured, most within the ages of 18 and 25. Maduro accused Lopez of terrorism and murder, and sentenced him to 14 years in prison, though he was only briefly imprisoned and later put under house arrest. Many world leaders have shown support for Lopez and called for his release, including President Donald Trump, Prime Minister Justin Trudeau, and Prime Minister Theresa May.
To this day, Lopez keeps a low profile, and yet he has become a leader and a symbol of the opposition. Since then, more people have revolted. Maduro now relies on the military to suppress the protests, often using tear gas and water cannons. As inducement, Maduro has promoted over a hundred soldiers to the rank of general amongst other things. Should the military turn against Maduro’s government, his control would be lost.
What’s going on now?
Maduro has recently been re-elected for another six-year term, though critics claim it is a farce. Politicians of the opposition say he will most likely continue using Chavez’s economic model without significant changes. Maduro himself pledges to release certain jailed opposition activists, increase oil production by 1 million barrels per day, and reach out to OPEC (Organization of the Petroleum Exporting Countries) as well as to China, Russia, and Arab nations for help if necessary. However, the opposition doubts the legitimacy of these pledges because of the lack of details given and his previous failure to fulfill similar promises.
In the meantime, inflation continues to rise. Though oil prices are picking back up, lack of investment has caused the output for Venezuela’s state-owned oil company to decrease, from which it is difficult to recover. Combined with the widespread violence and mass emigration, Venezuela’s future isn’t looking bright.
Statistics:
Maduro wishes to increase oil production by 1 million barrels per day
Violence as a result of inflation, shortages, and oppression have killed 27 479 people in 2016
Inflation rate in Venezuela reached 536.2% in 2017, estimated to reach 2068.5% this year
Bibliography
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