In graphics: a political and economic guide to Venezuela
Venezuela: a nation in a state
OF ALL the unflattering words used to describe the state of the country he governs, "disaster" is the one Venezuela's president, Nicolás Maduro, dislikes the most. Perhaps that is because it is so apt. Under his watch, the nation has entered a steep decline. Mr Maduro has restricted the publication of official economic figures. Those that have been divulged confirm that 2015 was a very bad year. And 2016 is going to be worse.
A global oil boom, which provided Hugo Chávez, Mr Maduro's populist predecessor, money to lavish on Venezuela's once neglected poor, is over. Mr Maduro has failed to persuade voters that he is a worthy heir. In a parliamentary election on December 6th 2015 the opposition Democratic Unity alliance (MUD) won two-thirds of the seats, the first time it has won a national election since Chávez came to power in 1999. Mr Maduro’s approval rating is not much above 20%. The new National Assembly is now engaged in a power struggle with the regime. Venezuela's Supreme Court, which can be counted on to side with the government, has ruled that three opposition MPs cannot be sworn in, depriving the MUD of its "supermajority".
The price of oil, which provides 95% of Venezuela’s foreign-exchange earnings, has long dictated the popularity of its leaders. The government's income from oil in the year to November 2015 was two-thirds lower than during the same period the year before. The oil price has fallen further since then. With less money coming in and demand for imports still strong, the value of Venezuela's foreign-exchange reserves has dropped alarmingly. A fall during 2015 in the price of gold, of which Venezuela has substantial holdings, has contributed to the decline in reserves.
The current oil slump would be painful, whoever was in power. The regime has greatly compounded the damage with policies that, though designed to favour the poor, end up impoverishing them and the state. Price controls—along with the shortage of foreign exchange—have led to acute shortages of basic goods, forcing people to queue for hours to buy necessities. Inflation is officially running at 141% as of September last year (the latest available figure). Analysts believe the true figure is at least 200% a year; some predict hyperinflation in 2016. The massive budget deficit, which the Central Bank finances by printing money, contributes to that risk.
The government has tried to hold down prices with a Rube Goldberg system of exchange controls. Venezuela has three legal exchange rates, including one that values the bolívar at 6.35/$. Venezuelans with connections in the government can obtain dollars at this ridiculously cheap rate, a major source of corruption. But in the unofficial market the bolívar is worth around 130 times less. The market dollar value of most Venezuelans' pay is thus pitifully low. Although the official price of goods is correspondingly cheap, many are available only at inflated prices in the black market.
To date, Venezuela has given priority to paying its foreign debts. The government has apparently decided that default, however tempting, would be too costly. Many of Venezuela's assets outside the country (including refineries and oil tankers) could be seized by creditors. Venezuela's restricted access to credit would be diminished even further if it defaulted. Although a series of multl-billion dollar loans from China, repaid in oil, are helping stave off a crisis, a default may be unavoidable if oil prices do not recover in 2016. The IMF estimates that Venezuela's GDP shrank by about 10% in 2015, making it the world's worst performing economy. The government admits the contraction was 7.1% up to the third quarter of 2015. Whatever the true figure, the sharp recession is undermining one of the regime's proudest claims: that under its rule Venezuela's poverty has fallen. Extreme poverty has indeed declined under chavismo (as it has done worldwide), but not as much as the government contends. Peru has made greater progress than Venezuela, where overall (rather than extreme) poverty has stayed stubbornly static since 2000.
In January 2016 Mr Maduro appointed a new economics team, but there are doubts about its willingness to tackle the nation's troubles. The minister in overall charge of the economy, Luis Salas, is a left-wing sociologist who, like others in the government, attributes the country's problems to an "economic war". He rejects some basic tenets of conventional economics, for example that printing too much money causes inflation. The new finance minister, Rodolfo Medina, is thought to be more pragmatic. Recent surveys have shown that alongside the economy and shortages, security is a major concern. The government stopped publishing comprehensive crime statistics in 2005, though it does admit there is a problem. The attorney-general has said that Venezuela's murder rate last year was 62 per 100,000 people, ten times the global average. The Venezuelan Violence Observatory, an independent research institute, says the rate is higher. The murder rate in Caracas is the highest in the region for a country's biggest city. Countrywide, 90% of murders go unpunished.
The government tries to keep ordinary Venezuelans ignorant of such demoralising facts through its domination of the media. Chávez began the process of shutting down the free press; Mr Maduro has continued it. Only one national newspaper is relatively independent. State television is filled with hours of pro-government propaganda. Mr Maduro, his wife, Cilia Flores, and the former head of the National Assembly, Diosdado Cabello, all have their own weekly television shows. Opposition politicians, several of whom have been imprisoned, depend upon social media to get their message out. Although the regime has made that as difficult as it can, the opposition’s election victory in December shows that democracy is still alive.
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