In Venezuela, everything is running out. Food, electricity, and basic necessities like toilet paper are scarce. Foreign reserves have been depleted, and the government is frantically selling its gold. And, as the country is running out of money and resources, President Nicolás Maduro is running out of time. Pressure is mounting on him to address his nation in crisis.
There’s one thing Venezuela isn’t running out of though: oil.
With larger crude oil reserves than Saudi Arabia, Venezuela gets more than 95 percent of its export earnings from this natural resource. Declining world oil prices have pushed the country into a perilous balance of payments crisis as capital inflows decline and the deficit increases. Without the revenue cushion from exports to mask mismanagement of the economy, a panoply of problems has now been exposed.
The opposition, striving to oust Maduro lawfully, obtained nearly two million signatures on a petition to recall the President, even though the law only requires 200 thousand.
Despite this display of public support, those hoping for a change in leadership face a long road ahead.
“The ongoing attitude is that the government will do everything possible to remain in power,” said Dany Bahar, an expert on Venezuela’s economy and a fellow at the Brookings Institution’s Global Economy and Development Program.
The petition must be verified by the Maduro government, but they purposefully delayed the process by cancelling a meeting that was meant to produce a decision yesterday. Even if the petition is verified, the opposition will still need to collect another four million signatures for a referendum before a recall election can be held.
Bahar says that if the government can delay the referendum until next year, then according to the constitution, the recall will simply result in the the vice president taking Maduro’s place until his term expires, rather than a new election.
The opposition is made up of various left wing, centrist, and moderate right-wing parties under the umbrella of the Democratic Unity Roundtable. They took control of the National Assembly for the first time in 16 years following an election in December. But Maduro still effectively holds power because he controls the military, the police and the Supreme Court.
“They are still playing under the guise of “democracy,” or they are trying to, in the sense that every time the assembly does something that they don’t like, the Supreme Court will come in and say that’s not constitutional,” said Bahar.
Luis Almagro, head of the Organization of American States (OAS), whose members include all the countries of North and South America, has taken note of Maduro’s disregard for democracy. On Tuesday, Almagro called for an emergency meeting to evaluate Venezuela’s violation of the constitutional order, a move that could lead to the country’s suspension from OAS.
In response to both domestic and international resistance, Maduro carried out the largest military exercise in Venezuela’s history last month and promised to prolong the government’s special emergency powers. Maduro blames the U.S. for the unrest and argues that the U.S. is planning an attack to overthrow Venezuela’s government, an accusation that has been totally repudiated by U.S. officials.
Instead, this rallying cry against the U.S. is seen by critics of Maduro as an attempt to distract Venezuelans from the opposition’s attempts to remove the President.
But even if the opposition is successful in ousting the President, Daniel Hellinger, Latin American specialist and professor of international relations at Webster University, doubts that the opposition would be any more capable of remedying Venezuela’s situation than Maduro.
Hellinger explained that the opposition is deeply divided. “I have no confidence in the opposition, let me tell you. But I also don’t have a lot of confidence in the government. So where does that leave me as an observer of Venezuela politics? Very pessimistic.” Hellinger said.
In the midst of this political upheaval, Venezuela’s economic situation continues to worsen.
With a nearly $40 billion deficit and a mere $16 billion in gold and foreign reserves, Venezuela has no way to pay its debts. The country’s supply of gold has been cut by a third in one year.
The solution so far has been to print more money, causing inflation to reach 500 percent. If things continue as are, the inflation rate is expected to reach 1,642 percent by next year, according to the Financial Times. But Venezuela can’t even afford to print the money. Vox reported that the country can no longer afford to fly its currency, which is printed abroad, back into the country.
“This way of managing the economy is hurting the poor more than anyone else,” said Bahar.
Because access to resources and foreign currency is so limited, many businesses are finding it impossible to operate. Coca-Cola announced that it is suspending production of soda because it cannot get sugar, and a slew of other businesses are announcing that they are pulling out of the country. McDonald's in Caracas is empty because a Happy Meal costs a month’s wages.
Bahar thinks the solution to Venezuela’s problems is three-fold. First, they must seek assistance from international institutions like the International Monetary Fund (IMF) and the World Bank to solve the problem of access to foreign currency and to get help restructuring their debt. “No one wants to go to the IMF though,” said Bahar. “No one wants to be told what to do.”
Second, the country must get government spending under control. Venezuela’s current budget is 20 percent of GDP whereas other countries operate around 3 or 4 percent.
Third, Bahar says they need to encourage foreign and domestic investment and remove unnecessary government interference, which impedes business.
While leaders fail to come up with the necessary solutions, people in Venezuela are waiting in supermarket lines for hours on end just to get enough food for the day. The increasingly agitated lines are policed by National Guard troops.
“The failure to solve the political crisis and look for ways of moving forward economically means that serious deterioration of living conditions in the country are taking place,” said Hellinger.
He added, “If both sides would be more serious about negotiating; if some other sectors within each group were to come together and say look, we’ve got to find a way out of this, I would be optimistic, but I’ve only seen a few lonely voices calling for things to go in that direction so far.”
Erica Evans is a Journalism Associate with The Cipher Brief.
