7 Reasons Venezuela’s Economic Crisis is Not So Black and White

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By now we’re all familiar with the apocalyptic images of Venezuela’s social decline proliferating across mainstream media outlets. Empty store shelves, interminable lines outside of grocery stores, sick patient lefts to die in underserved public hospitals, looting – it’s as though reporters were adapting the script from some 80s dystopian action film. And indeed, since Venezuela’s ongoing economic crisis entered a more acute phase several months back, the global media consensus seems to be that the once oil-rich nation is now a failed state teetering dangerously on collapse.

For their part, Venezuela’s official state media and those sympathetic to the Bolivarian cause have countered these claims by propagating a similarly alarmist narrative. Socialist party mouthpieces like Misión Verdad evoke shadowy conspiracy theories that pit Venezuela’s socialist experiment against a capitalist mafia intent on destroying the country, while more respectable outlets like Telesur walk a fine ideological line that recognizes the situation while propping up the government’s efforts to stabilize the crisis.

Considering that Bolivarian Venezuela’s success or failure has been framed as a Cold War-style ideological battle between neo-liberal capitalism and Hugo Chávez’s “21st century socialism,” it’s no surprise that the recent developments have so clearly polarized the opposing camps. Unfortunately for those of us trying to cut through the noise and get a sense of what’s really going on, most of the information that comes our way is filtered through one of these ideological lenses.

What’s undeniable is that Venezuelans are weathering an increasingly difficult social and economic situation. Food, toilet paper, medicine, and electricity have all become scarce in the nation of 31 million; and the images we see of long lines stretching around blocks are real and all-too-common. To add insult to injury, many Venezuelans return home from day-long shopping excursions with empty hands, and must turn to the exorbitantly-priced black market just to satisfy their basic needs.

Of course, this doesn’t mean that Venezuelans are huddling around dumpster fires for warmth as buildings collapse around them, but the country’s working class in particular has felt the squeeze of a seemingly unstoppable economic downward spiral. The reasons for the current difficulties are complex, and there’s certainly plenty of blame to go around, so we’ve rounded up a number of different sources in an effort to stake out that gray area between the extremist media narratives. Here’s what we’ve found.



Photo: Carlos Garcia Rawlins for Reuters

It doesn’t take an economist to figure out that if 95 percent of your export revenue comes from oil, you’re gonna take a hit when the price of oil tanks. And that’s exactly what’s happened over the last 20 months, cutting revenues at Venezuela’s state oil company by more than 40 percent. The Venezuelan government has responded to reduced spending power by simply printing more money, leading to inflation estimates as high as 700 percent for 2016.

To gauge what that means in practical terms, Venezuela’s largest bill is worth 100 bolivares, which translates to less than 10 cents. Couple this with a series of bad investments helmed by Chávez himself, a hopelessly undiversified economy, detrimental price controls, a convoluted three-tiered currency exchange rate, and nearly $200 billion dollars in foreign debt, and you have a recipe for economic disaster.



Photo: Marco Bello for Reuters

Named after the voracious leaf-cutter ant native to South America, bachaqueros are Venezuela’s black market foot soldiers. Relying on a network of informants, bachaqueros specialize in snapping up cheap, price-controlled goods as soon as they appear in supermarkets in order to resell them for a hefty profit. Of course, this usually means that the regular folks standing on line don’t even get a chance to purchase their necessities.

President Nicolás Maduro has railed against black market speculation over the years, going so far as closing the border with Colombia to prevent traffickers from selling subsidized Venezuelan goods to Colombians for a profit.



Photo: Karla Calderón

Not all of Venezuela’s troubles are man-made. The country has been dealing with its worst drought in over forty years thanks largely to El Niño, and earlier this year primary reservoir levels reached critical lows. As Maduro’s government mobilized to counteract the effects of the drought, the international media began reporting on electricity rationing measures like a shortened workweek and rolling blackouts.

It all sounded very dramatic, but the government’s emergency measures were actually quite effective, and electricity use has virtually returned to normal levels. Nevertheless, a country’s ability to weather natural disasters also has to do with infrastructure, organization, and planning. Many have attributed the devastating effects of the drought to poor maintenance of Venezuela’s existing infrastructure and a lack of investment in new facilities – both of which fall squarely on the shoulders of Maduro’s government.



It’s a line we’ve heard time and time again over the last few years, but there’s no denying that Venezuela is home to eight of the 50 most violent cities in the world, with Caracas topping the list. It’s a trend that is getting progressively worse, but it started well before Chávez came to power, and the connection between the current violence and the government’s socialist agenda is not entirely explicit.

What is undeniable is that the prevalence of casual crime and generalized feeling of insecurity has made an already bad situation much worse. Long lines outside of supermarkets have turned into hunting grounds for petty thieves who snatch cell phones from unsuspecting shoppers, while everything from schools to medical laboratories have been left without essential materials by sophisticated heist operations.



Photo: Valeria Pacheco for Getty Images

It’s already well-documented that Chávez’s regime created an entire class of shady loyalist oligarchs known pejoratively as “boligarchs,” but as Venezuela’s foreign currency reserves dry up we’ve only now begun to understand the depth of the problem.

For starters, the state oil company PdVSA – which accounts for 25% of Venezuela’s GDP – was recently caught up in an international money laundering scandal. Shocking reports of kickbacks, shell companies, and even drug-trafficking paint a pretty bleak portrait of how the company has been doing business. Meanwhile, it turns out wealthy businessmen with party connections have been pillaging billions of dollars out of the country’s currency reserves through flagrant import fraud, while a long list of costly government investments have gone unfinished after funds mysteriously dried up.

Add to all this the fact that Hugo Chávez’s daughter is the wealthiest woman in Venezuela, with $4.2 billion dollars in wealth spread around numerous foreign banks, and it looks like the Bolivarian Revolution likes to wash down its socialism with a swig of kleptocracy.


Economic Warfare

Photo: Jorge Silva for Reuters

Traditional Venezuelan elites were never too happy with Hugo Chávez’s populist pretensions. When they opted for an old-fashioned coup d’état back in 2002 – with alleged backing from Spain and the United States – their fantasies of returning to the old oligarchic order were quickly squashed after Chávez returned to power with overwhelming popular support only 47 hours later.

Since then, the Bolivarian government has repeatedly insisted that a conspiracy of global economic and political elites has been engaged in non-conventional warfare in an effort to invalidate the country’s socialist system. The paranoid language of these assertions often comes off as a bit silly, but there is some anecdotal evidence that suggests a conscious campaign to destabilize Venezuelan society through economic manipulation.

For instance, many have observed that the most basic consumer items tend to disappear immediately prior to elections, only to return to shelves weeks later with past-due expiration dates. Furthermore, it’s been reported that a group made up of numerous private industrial interests called Conindustria has repeatedly increased their import budget only to report a decrease in their inventories and productivity.

In the end, it doesn’t seem so far fetched that the enemies of Chavismo would be leveraging their own economic power to topple a government that’s all but stripped them of their privilege.


Growing Discontent

Photo: Juan Barreto for AFP

It’s not hard to see why Venezuelans are generally fed up with the status quo. Maduro’s approval rating currently stands at a dismal 24.3% and the federal election commission has just approved a petition for a recall vote that would leave power in the hands of his vice president, Jorge Arreaza. Naturally, even Maduro is reluctant to quash popular will, but many specialists suspect he will push the vote back as far as possible in order to switch roles with Arreaza and re-assume the presidency after the recall removes him from power. WTF?

It is important to note, however, that generalized discontent doesn’t necessarily translate into support for the opposition. Many average citizens are desperate for a change in their circumstances, but still mistrust Henrique Capriles’ opposition coalition due to its historical association with Venezuela’s elite. Furthermore, a movement called “critical Chavismo” has begun to sprout up with clamors for systemic change from the left. While the movement has generally been tolerated, groups like the Trotskyist Marea Socialista have been openly persecuted by Maduro’s government.