Venezuela Surrenders But
Will God Saves Them ?
Venezuela seeks mediation with US
President Maduro (R)
has asked Ernesto Samper (L) to mediate between Venezuela and
the US
Venezuelan President
Nicolas Maduro has called for a relationship with the United
States based on diplomacy and an end to what he claims is a US
plan to destabilise his government.
Mr Maduro was speaking to supporters in Caracas before meeting
the Secretary General of the Union of South American Nations
(Unasur), Ernesto Samper.
He later asked Mr Samper to mediate between Venezuela and the US.
The US imposed sanctions against Venezuelan officials in
December.
They were aimed at those allegedly involved in suppressing the
anti-government protests that shook Venezuela in the first six
months of 2014.
On Monday, the US also imposed visa restrictions on unnamed
Venezuelan officials it accuses of human rights violations and
corruption.
'New tone'
Addressing crowds of supporters in the Venezuelan capital,
Caracas, Mr Maduro called on the US president to "rectify and stop
in time the coup plan (that would see) the destruction of
Venezuela.
"President Obama, I say this with goodwill: We hope that you set
a new and different tone with Venezuela."
Relations between the US and Venezuela have been tense for many
years. The two countries last had ambassadors in each other's
capitals in 2010.
Mr Maduro later told a news conference he had asked Unasur to
"support the South American country" by mediating with the US.
For his part, Ernesto Samper said he would take Mr Maduro's
concerns to Unasur member states, adding that it was them who
could decide on whether to take any action.
The South American union is based in the Ecuadorean capital,
Quito, and is made up of 12 countries, including Venezuela.
Mr Maduro's comments come days after he accused US Vice-President
Joe Biden of plotting a coup against his left-wing government, an
allegation that Mr Biden's office called "baseless and patently
false".
Mr Biden (left) and Mr Maduro (right)
had an unexpected meeting in Brazil last month
Too Little, Too Late For Venezuela?
Rapidly declining world oil prices, a lack of basic
goods in supermarkets, insecurity, and a more united
opposition look set to make 2015 the
most difficult year yet for Venezuela’s Nicolas
Maduro and the late Hugo Chavez’s Bolivarian Revolution.
Venezuela is in recession and experiencing one of the
highest rates of inflation in the world. Its economy contracted
by 2.8 percent in 2014, with inflation now running
at 64 percent. World oil prices have fallen to below
$50 a barrel, with Venezuela hit especially hard due
to the lower price its heavy-oil trades at on the world
market.
These economic factors, combined with fixed exchange have
resulted in shortages of most basic goods. Queues
stretching for blocks outside the state-run supermarkets
are now a daily (and nightly) occurrence throughout the
country.
Those most affected happen to be the poor – the core
constituency of Maduro and the ruling socialist party
(PSUV) – explaining the president’s 22 percent approval
rating.
In an effort to boost falling oil prices Maduro recently
embarked on a whirlwind tour of OPEC countries, although
there is little evidence so far that he managed to secure
any benefits for the country’s economy, and the price of
oil has continued to plummet.
With the national budget built on the strength of oil
exports, which account for 96 percent of export revenues,
the falling price of commodities is particularly
devastating. For every $10 decline in oil prices,
Venezuela’s trade balance worsens by 3.5 percent of GDP.
Economists have argued that oil needs to be trading at
$120 for Venezuela to balance its budget and the IMF
has predicted a 7 percent contraction of the economy
in 2015.
The difficulty for Maduro is that the economic
decision-making of the Bolivarian Revolution has been
based on policy and for short term electoral gain. Any
macro-economic restructuring would come at a significant
social cost and would likely further alienate Maduro’s
core supporters who have benefitted from social programmes
funded by oil revenues.
With legislative elections scheduled later in 2015, it is
unlikely that Maduro will implement drastic economic
reforms and veer from Chavez’s time-honored tradition of
winning over support with massive subsidies and government
spending.
The high social costs of adjusting macro-imbalances
combined with legislative elections later in 2015 will
make a meaningful economic reform both difficult and
unlikely.
“God will provide”
In his annual State of the Nation address on 21 January,
Maduro confirmed that no cuts would be made to social
programs. He did however hint that gas prices — for years
the lowest in the world at $0.02 a liter, thanks to large
government subsidies — would have to be raised,
calling them a “distortion.”
This is not without risk as it could lead to further
disillusionment against the government, with gas prices
long considered a politically charged policy area. Similar
increases in the price of gas in 1989 led to higher bus
fares, which kicked off violent protests in Caracas. The
“Caracazo” as it came to be known, was a pivotal moment in
the gradual collapse of Venezuela’s then two-party system.
Maduro’s vague rhetoric – blaming
the financial troubles on the political opposition and
currency speculators and declaring “God will provide” –
does not suggest that any major economic reform is likely.
The artificially fixed exchange rate of 6.3 Bolivars to
the dollar for basic goods such as food and medicine will
be kept, although two other rates (SICAD I and SICAD II)
will be combined, with another third rate created to allow
private sector participation. It is still unclear what the
exchange rate will be and whether it will have an effect
on diminishing the rampant black market.
Some commentators have seen this as an undercover
devaluation of the bolivar, forcing companies to pay more
for their dollars. This would avoid a full-blown
devaluation and the inevitable social unrest that would
follow in the wake of further inflation
The announcement that the minimum wage increase by 15
percent is unlikely to have a significant effect.
Increasing inflation combined with the unlikely prospect
of buying goods at the official exchange rate will ensure
life remains difficult for the people queuing for goods in
Venezuela.
Lack of basic goods
The dollar is currently trading at above 180 bolivars on
the black market and has been part of the reason
for the chronic shortage of basic goods in
Venezuelan supermarkets.
Queues
outside grocery stores have reached lengths unseen before
in Venezuela, with shoppers waiting hours at a time to buy
flour, milk, toilet paper and nappies among other
essential goods that are in short supply.
Police and National Guard units have been deployed to
maintain order, whilst more units have been deployed since
2014 on the border with Colombia to quell the rampant smuggling
of cheap goods from Venezuela to its neighbor.
This prompts the question – what resources are left to
combat the rapidly surging crime rate in the country?
Venezuela, and specifically Caracas, is experiencing some
of the highest levels of violent crime in the world. Any
reductions in social spending are likely to further
complicate the situation in 2015,
leading to higher levels of insecurity.
Finally, a united opposition?
In the wake of Maduro’s annual address, crowds gathered
in Caracas to protest the government on January 24 in
scenes similar to the early days of the 2014 protests,
albeit on a smaller scale.
What could be a defining factor in 2015 is a more united
opposition. Henrique Capriles did not give his backing to
the protests in 2014, instead demanding that the people
wait until the economic effects of bad macro-economic
policy are felt amongst the wider population.
It appears that Capriles believes that time is now, and
there is a possibility that the opposition will be more
united come the legislative elections later in the year.
In the meantime, it remains to be seen whether there is a
repeat of the social unrest that rocked Venezuela in early
2014. Even if Maduro attempts macro-economic reforms, it
may be a case of ‘too little, too late’, with oil prices
now so low that further economic hardship is almost
inevitable.
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