Venezuela: An Explainer

Venezuela is suffering from severe food shortages, high crime rates, civil unrest, and an increasingly authoritarian executive. Many Venezuelans believe that President Nicolas Maduro and Hugo Chavez before him mismanaged the economy, leading to the current crisis. Oil prices have fallen and business corruption from the business elite are also contributing factors (Council on Foreign Relations).

In January 2016, power in the National Assembly shifted towards the opposition for the first time since before the year 2000. President Maduro has been taking steps to consolidate his own power and strip the legislature from a lot of its power. He is also attempting to revise the country’s constitution by forming a constituent assembly of 500 members who would be responsible for its drafting. In October 2016, Venezuela’s Supreme Court put an end to the National Assembly’s power to control the economy. In March 2017, the judicial branch briefly dissolved the National Assembly, but undid this after international outcry. Maduro was successful, however, in preventing his main political opponent from running for office for 15 years.

These autocratic measures from Maduro, along with the economic and social problems civilians are facing, have led to massive protests and international condemnation, including threats of expulsion from the Organization of American States. As of May 2017, 80% of Venezuela’s population wanted Maduro to step down. Frequent protests have turned violent, living 29 people dead since March. The government has taken steps to appease the population without much effect. The minimum wage increased by 60% in May, but inflation is so high that people were still unsatisfied. Despite the protests, any removal of the president would likely come from the military. Maduro has adopted the “chavismo” leadership style from Hugo Chavez, which gives the military a large amount of prestige, power, and responsibility. Until they turn against the president, they will protect him from civilians and maintian his status.

Venezuela’s dependence on oil has made it vulnerable to economic shock following the fall of global oil prices. When prices fell from $111 per barrel in 2014 to $27 in 2016, Venezuela’s weak economy fell into a downward spiral. This led to a 12% drop in GDP and an 800% increase in inflation. Oil accounts for 95% of Venezuela’s export earnings and 25% of its GDP. With such a lack of economic diversification, Venezuela has left itself at the mercy of a single commodity’s performance in the global market.

The current situation in Venezuela stems from the combination of Hugo Chavez’s leadership between 1998 and 2013. Chavez was corrupt and anti-American, but was a successful populist who reduced poverty. He was elected in 1998 on a populist platform. He promised to tackle corruption and use Venezuela’s oil wealth to reduce poverty and inequality. As President, he helped the poor by expropriating millions of acres of land and nationalizing hundreds of private businesses. These policies, in addition to food and housing subsidies, health care reform, and education reform, reduced the poverty rate from 50% in 1998 to 30% in 2012. Chavez secured consolidated his power by manipulating the Supreme Court and eliminating one chamber of Congress and removing term limits through a referendum. Geopolitically, Chavez tried to align the Latin American countries against the United States. In terms of economics, Chavez unwsisely utilized price controls and import subsidies to keep prices low. Soon enough, Venezuela was unable to sustain this system until it fell into freefall when oil prices dropped in 2016. Despite these mistakes, Chavez remained popular until his death in 2013 and was replaced through an election by the strongest “chavismo” candidate Nicolas Maduro. Maduro’s Venezuela ranks 166 out of 176 on Transparency International’s Perceived Corruption Index. His government still controls over 500 companies, though most of them are operating at a loss.

Venezuela’s failing economy is now creating a humanitarian crisis. 85% of basic medicines are unavailable or difficult to obtain. Infant mortality rates spiked from 11.6 per 1,000 in 2011 to 18.1 in 2016. Maternal mortality also doubled since 2008 to reach 130 per 100,000. 30% of school aged children are malnourished, and to make matters worse, Maduro has blocked the opposition-led Ntional Assembly from seeking international assistance. Crime has also been on the rise. 28,749 homicides occurred in 2016, which is the highest level ever recorded. As a result  of these health and crime issues, 150,000 people left the country in 2016 (Council on Foreign Relations).

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