Venezuela is collapsing

How a natural resource has brought the wealthiest nation in Latin America   to economic and political chaos

March 5, 2013. Hugo Chavez is dying for cancer in Caracas. March 7, 2019. An electrical blackout started in Venezuela. 6 years after the death of one of the most populist leader ever, we are still discussing about the will he has written. From being the wealthiest nation in Latin America to the brink of social and economic ruin, Venezuela is paying the price for wrong decisions.

February 4th, 1992. A first coup d’état takes place. It’s 5 a.m. Some hours later, an unknown lieutenant colonel is arrested, letting the  social democrat Carlos Andrés Pérez survive. The coup was a fiasco, but surrounding to the army of the unpopular president, eloquent and dashing in his red beret, Hugo Chavez introduced himself to the world: “listen to Comandante Chávez” – and said his objectives had not been met “por ahora” (for now). 30 years in prison deserved. 2 years later, Chavez is pardoned and released. 4 years later he wins the presidency with 56 percent of the vote. 14 years in office. Then, cancer. Chavez dies but Maduro makes him immortal. Venezuela_Chavez_056aa-2As an unconditional follower of Chavez, Nicolas Maduro wins the elections. He becomes the president of a country rich with natural resources such as oil, gold, diamonds and other minerals.  Nowadays, this country has a a GDP worse than Syria’s, it has the world’s worst inflation. Its people cannot find food or medicine. I was at the bus stop in Tel Aviv last week. I asked for directions to a girl. Hispanic accent. She’s from Venezuela. We start to talk about her country. “La gente se muere de hambre” -People are starving – “It’s complicated.” She said. But actually is not. The truth is that it’s not complicated at all, at the end of the story. Because the reason why Venezuela is collapsing can be summarised in a word of three letters: oil.

Oil has been the primary agent who condemned Venezuela to a triple crisis: constitutional , economic and humanitarian.  How a natural resource all alone can bring a country to the chaos? I will tell you the story.

Economic crisis

The story begins with Venezuela  owning almost 18% of the world’s crude oil reserves. In 1975, President Carlos Andres Perez nationalised the oil industry, creating state-owned Petroleos de Venezuela, S.A. (PDVSA). Venezuela-Pdvsa-petrolio-567x400In 2013, Venezuela derived around 96 percent of its export earnings from oil industry.  From then, the economy of the country has been based almost only on the petroleum sector. Basically, the Government implemented a strategy to sustain all public expenses with oil industry. It concentrated all the economy of the country in this resource. It means that all the incomes came from oil sector and the great majority of the population worked in this industry.  So, when in June 2014, a substantial decline in oil prices occurred, it sent Venezuela’s economy into a tailspin. The strategy of sustaining the economy through oil failed. Money started to be printed to cover the shortfall in government finances. The printing of money to finance the government’s big fiscal deficits drove to hyperinflation. The concentration of jobs in the oil sector only made more expensive extracting petroleum than imported it. The same happened with basic products.  Since Venezuela has been focusing on producing nothing else but oil, it had to import all everyday goods (food, medicines, toilet paper etc.. ) But -we all know- importations are expensive. Prices went crazy ( 1 kg of apples could cost the equivalent of 18 € ) . To solve the situation the Government established  maximum selling prices on basic goods; our 1kg apples couldn’t be sold at more than the equivalent of 5 €. Unfortunately, the result was underproductive: with limited prices, importing goods became more expensive than selling them. Scarcity and a black market began to bloom.

Constitutional crisis

Democracy implies division of powers. In Venezuela the executive power is exercised by the President (Nicolas Maduro, from 2013). The judicial branch is headed by the Supreme Tribunal of Justice while the legislative power is represented by the National Assembly.

During Chavez mandate, the National Assembly was “Chavista”, indeed all the measures passed easily.  After Chavez death, Maduro started its new job. And so did the MUD. The MUD, Mesa de la Unidad Democrática , is a coalition formed to unify the opposition to Socialist Party. In the 2015 parliamentary election, the MUD won the legislatives. It became the largest group in the National Assembly. It was the opposition for President Maduro,  giving him a hard time. To solve this situation and gain power, in 2017 Maduro came up with two strategic decisions. He made the Supreme Court publish two rulings: sentencia 155 and sentencia 156. Sentencia 155 eliminated the Venezuelan National Assembly (Maduro’s opposition) replacing it with a Constituent Assembly whose goal was to disempower opposition to the government.  Sentencia 156 essentially established that no mixed companies can exist in Venezuela and oil industry remains to be controlled by the State. Through these two rulings, Maduro stripped the Assembly of legislative powers and took those powers for itself. He now manages the Assembly and the Supreme Tribunal of Justice and he prohibited freedom of press.

Humanitarian Crisis

The recipe of the humanitarian crisis is easy. We have to take the two previous crisis and cook them together. Chavez and Maduro created a growth rate which is not sustainable, politics has became a tale of unconstitutional measures. Hyperinflation carried immense implications to Venezuelan people. Around 2.3 million Venezuelans have left the country in recent years. But for those who can’t afford to leave, life is looking grim.  Violent street protests are spread all around the country. Streets are dispersed with tear gas, the fire is set to barricades of trash; it’s the way to ask President Nicolas Maduro to step aside. https___cdn.cnn.com_cnnnext_dam_assets_190223165825-03-venezuela-unrest-0223

Security forces use disproportionate repression, carrying out violent abuses against the opponents. But there is no fear of repression, freedom has turned into a value in which it makes sense fight for.

Venezuela went from a wild and predatory capitalism condition to a Chavista para-communist authoritarianism. First, the state was privatized, now it falls down. Guaidó seems to be a beacon in the storm, but whoever wins the current struggle for control- Maduro or Guaidó- has to come up with ideas for getting the country back on its feet. The country has to retrace its steps. And I am not talking about the step standing in front of a picture of Simón Bolívar, but the one Venezuela took forward a natural resource: oil.


Rebecca Katerina Gutmann

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