Venezuelan President Nicolás Maduro faces tough economic test

BIG SPEECH: Venezuelan President Nicolas Maduro delivers his annual state-of-the-nation address Wednesday beside a framed poster featuring the late President Hugo Chavez at the National Assembly in Caracas.
BIG SPEECH: Venezuelan President Nicolas Maduro delivers his annual state-of-the-nation address Wednesday beside a framed poster featuring the late President Hugo Chavez at the National Assembly in Caracas. AP

Two days after Venezuelan President Nicolás Maduro announced a series of measures to deal with the punishing economic crisis, Ruth Cardona was thankful she didn’t have babies or sick people in the family.

“You can’t find diapers right now,” she said. “And the line to get into the pharmacy is horrible.”

Plummeting oil prices have rattled nations across the world, but in few places is the crude crunch on such naked display as Venezuela. Oil accounts for 96 percent of all the country’s export revenue, and as less hard currency is coming in to finance imports, everything from beef to diapers have been hard to come by.

The shortages (and even rumors of shortages) have only led to more panic buying, more hoarding, more speculation and Biblical lines thousands of people long.

Cardona — a homemaker who lives on the outskirts of Caracas — said that she didn’t shop for two weeks because she couldn’t wrap her head around the crowds. Instead, she went to resellers.

“There are people in my neighborhood who make their living by buying everything they can and then selling it at higher prices,” she explained. “If you can’t get into a supermarket by noon, everything’s gone.”

This is a humiliating position for Venezuela to be in. Just a few years ago, the Andean nation was using its vast oil wealth to prop up allies like Cuba, form new trading blocs like the ALBA and export its socialist ideals. Now, the country has become a poster-child for economic mismanagement.

On Wednesday, the same day that Maduro was announcing measures to deal with the crisis, the International Monetary Fund predicted the county’s economy would shrink a whopping 7 percent in 2015 — even as the global economy is expected to grow 3.5 percent.

This is particularly bad news for a country that was already suffering from economic unrest. In 2014, there were 9,286 marches and protests, a record high, according to the Venezuelan Observatory of Social Conflicts. Demonstrations that started in February, and which were fueled in part by crime and the economy, left at least 43 dead and made global headlines.

But all that tension came as Venezuelan oil averaged $88 in 2014 and pulled in some $66 billion in revenue. This year, Venezuela will be lucky if its oil recovers to $50 a barrel — it was at $39.52 on Friday — and still that would only bring in about $35 billion in revenue, said Alfredo Croes, a political and economic analyst in Caracas.

“We’re facing a situation where the government is out of options and the people have to choose between going to work or waiting for hours in line to buy groceries,” he said. “Believe me, there’s massive suffering going on here and I don’t see how we’re going to get through the year without protests.”

The government is trying to keep the lid on. Last week, as Maduro announced modest economic reforms, including loosening exchange-rate controls and the possibility of increasing domestic gasoline prices, he also offered treats. There was a 15 percent increase in wages and pensions, more subsidized housing and the expansion of scholarship programs.

While those programs have obvious mass appeal, they’re also inflationary. Venezuela had inflation of 64 percent in 2014 — the world’s highest by some accounts — but it’s likely to hit the triple digits in 2015, said John Magdaleno, a Caracas-based political analyst. And as people see their purchasing power eroded, the mood will continue to sour.

“There’s a growing climate of unease and collective irritation,” he said. “The population is wasting so much time waiting in line at supermarkets and pharmacies … The question is what’s the government’s capacity to handle this social tension?”

In many ways, Maduro seems to thrive on the tension — blaming violence and disruptions on his opponents. On Friday, he was at it again, reiterating claims that the economic crisis is part of a widespread international conspiracy against him.

“In Venezuela, there is an economic coup and a coup d'etat coup under way,” he told supports who had gathered to mark the 57th anniversary of the end of the Marcos Pérez Jiménez dictatorship. “I call on the country to fight against this coup.”

He also said (as he has in the past) that he would provide proof of the right-wing “conspiracies” that aim to end the socialist revolution. In the past, Maduro has used such excuses to detain opposition leaders, including former presidential candidate Leopoldo López, who has been jailed since February.

On the other side of town Friday, the coalition of opposition parties, known as the MUD, called for anti-government protests.

“There will be no solution for the shortages in the country while we have an economic model that produces misery,” Jesús Torrealba, the organization’s executive secretary, said in statement. “Let’s advance over the rubble and red-disaster [a reference to the ruling-party colors] toward liberty equality and progress.”

The announcement was just as notable for who was at the announcement: former presidential candidate and Miranda Gov. Henrique Capriles, who had been shunned by many opposition hardliners for his conciliatory stance during last year’s protests.

Pundits are expecting demonstrations and other shows of force to be on the uptick as the country heads into National Assembly elections this year.

The National Electoral Council, which is controlled by the ruling PSUV party, hasn’t set a date for the vote yet, but it’s likely to be a huge challenge to the Maduro administration, which has seen its popularity plunge to all-time lows.

When the late Hugo Chávez was president, his lowest approval rating was 31 percent in 2003. Maduro’s polls are now in the low 20s, by some measures. In addition, an increasing number of people no longer identify with the ruling PSUV party.

“The fallout from the economic crisis has steadily altered Venezuela's political landscape, with voters defecting from the PSUV as they have seen government policies impact their immediate well-being,” the Texas-based Stratfor intelligence group said in a statement. “In this environment, Capriles and the opposition parties could conceivably break the PSUV's nearly 10-year legislative dominance.”

But the opposition has a long track record of falling short at the polls, even when government discontent is running high. During his speech this week, Maduro dared doubters to read too much into his approval ratings and the future congressional elections.

“You say that Maduro has 80 percent [of the country] against him. I say let it be 150 percent,” he told the National Assembly. “What I am sure about is that the Chavista nation will give us an overwhelming victory in the memory of Hugo Chávez.”

Cardona, the housewife, is part of the Chavista nation who sees Maduro as a standard-bearer for the poor. She said she was grateful he didn’t announce large cutbacks to welfare programs this week and she believes the country is in good hands.

“The people I know have faith in Maduro and faith that we will see results,” she said. “We’re going through tough times now, but with hard work, we can get out ahead.”