The crisis in Venezuela is the socioeconomic and political crisis that Venezuela has been experiencing since 2012 under the presidency of Hugo Chávez and which has continued into the current presidency of Nicolás Maduro. It is the worst economic crisis in Venezuela's history and among one of the worst crises experienced in the Americas. The crisis was the result of "Bolivarian Revolution's" populist policies under the administrations of the Chávez and Maduro governments and has deepened as a result of low oil prices in early 2015.
The contraction of national and per capita GDPs between 2013 and 2017 has been more severe than that of the United States during the Great Depression, or of Russia, Cuba, and Albania following the fall of communism. In recent years, the annual inflation rate for consumer prices rose hundreds and thousands of percentage points, while the economy contracted by nearly 20% annually. Hunger escalated to the point that the Venezuela's Living Conditions Survey (ENCOVI) found nearly 75% of the population had lost an average of at least 8.7 kg (19.4 lb) in weight due to a lack of proper nutrition. According to a study published in 2018 by three Venezuelan universities, almost 90% of the Venezuelan population now lives in poverty.
The crisis has affected the life of the average Venezuelan on various levels. Political corruption, shortages in Venezuela, closure of companies, unemployment, deterioration of productivity and competitiveness, and high dependence on oil are other problems that have also contributed to the worsening crisis. Regarding crime, Venezuela is one of the most violent countries in the world, with a murder rate in 2015 of 90 per 100,000 people according to the Observatory of Venezuelan Violence (compared to 5 per 100,000 in the US).
Video Crisis in Venezuela (2012-present)
Background
Hugo Chávez
Chávez was a former military officer of notable reputation despite having established and led an unsuccessfully executed coup in 1992. Later, in 1998, he was elected president of Venezuela winning with a populist campaign and propaganda. His promises as a presidential candidate included fighting poverty and fighting social disparity by putting the nation's abundant oil resources to the right use. After assuming office, in his fifteen years of presidency till his death, Chávez indulged in many radical measures to do justice to his earlier promises. He usurped millions of acres of land and thousands of privately owned business and foreign assets were nationalised. Companies like Conoco Phillips and Exxon Mobil lost multiple projects to the Chávez's government.
As president, Chávez intended on directing all Latin American nations into one unit against the US. Such actions hinted directly at Chávez's influences being drawn by Simón Bolívar. His efforts towards this produced the Bolivarian Alliance for the Peoples of Our America (ALBA) - a socialist bloc consisting of leftist Latin American countries. He also set up the Petrocaribe, which is an alliance of Caribbean nations with Venezuela allowing Venezuela to export oil to members of the agreement at discounted rates.
Apart from such physical expressions of radicalism fueled by populism, Chávez also took measures that established longevity in his tenure as the president. Soon after being elected, he successfully altered the constitution (CRBV) to extend his time as the president by another term by gaining the majority of the votes. Direct and pre-existing easy access to and control of the military by common civilians was curbed along with the complete removal of one of the chambers of Congress. These radical actions led to his brief eviction for two years by a military coup before he re-assumed office in 2004. Upon returning, Chávez claimed power and control over the supreme court by a panel of twelve new justices and expanding it in size. In 2009, he passed a referendum to end presidential term limits.
All of Chávez's efforts earned him a great reputation, especially with the poor. Much of his time as president was spent helping the poor by providing subsidised food, housing and education and health care programs. The poverty rate was 30% at the time of his death, as opposed to 50% at the time of assuming office.
Chávez presidency
Increasing oil prices in the early 2000s led to levels of funds not seen in Venezuela since the 1980s. Intending to maintain political power through social programs, Chávez established Bolivarian missions, aimed at providing public services to improve economic, cultural, and social conditions. According to Corrales and Penfold, "aid was disbursed to some of the poor, and more gravely, in a way that ended up helping the president and his allies and cronies more than anyone else". The Missions entailed the construction of thousands of free medical clinics for the poor, and the enactment of food and housing subsidies. A 2010 OAS report indicated achievements in addressing illiteracy, healthcare and poverty, and economic and social advances. The quality of life for Venezuelans had also improved according to a UN Index. Teresa A. Meade wrote that Chávez's popularity strongly depended "on the lower classes who have benefited from these health initiatives and similar policies".
The social works initiated by Chávez's government relied on oil products, the keystone of the Venezuelan economy, with Chávez's administration suffering from Dutch disease as a result. By the end of Chávez's presidency in the early 2010s, economic actions performed by his government during the preceding decade, such as overspending and price controls, proved to be unsustainable. Venezuela's economy faltered while poverty, inflation and shortages in Venezuela increased.
According to analysts, the economic woes Venezuela continued to suffer through under President Nicolás Maduro would have occurred even were Chávez still in power. In early 2013, shortly after Chávez's death, Foreign Policy stated that whoever succeeded Chávez would "inherit one of the most dysfunctional economies in the Americas--and just as the bill for the deceased leader's policies comes due".
Maduro presidency
Following Chávez's death, Nicolás Maduro became president after defeating his opponent Henrique Capriles Radonski by a mere 235,000 votes, a 1.5% margin. Maduro continued most of the existing economic policies of his predecessor Chávez. Upon entering the presidency, Maduro faced a high inflation rate and large shortages of goods, problems left over from Chávez's policies.
Maduro has blamed capitalism for speculation that is driving high rates of inflation and creating widespread shortages of basic necessities. He has said he is fighting an "economic war", referring to newly enacted economic measures as "economic offensives" against political opponents whom he and loyalists state are behind an international economic conspiracy. However, Maduro has been criticized for only concentrating on public opinion, instead of tending to practical issues which economists have warned about, or creating ideas to improve Venezuela's economic problems.
By 2014, Venezuela had entered an economic recession and by 2016, the country had an inflation rate of 800%, the highest rate in its history. The International Monetary Fund expects inflation in Venezuelan to be 13,000% for 2018.
Maps Crisis in Venezuela (2012-present)
Economic crisis
The origin of this economic collapse, framed in the context of the Great Recession, years after the improvement of the extraction of unconventional hydrocarbons in the United States, showed a macro-economic phenomenon of great importance for the region. From China's slowdown, a steady increase in oil production and stable demand, generated a surplus of this resource that caused a drop in prices of reference crude oil, WTI and Brent, falling in 2014 from $100 a barrel to $50 a barrel, causing unfavourable changes in the economy of Venezuela. (See 2010s oil glut)
Due to high oil reserves, lack of policies on private property and low remittances, by 2012, of every 100 dollars, more than 90 came from oil and its derivatives. With the fall in oil prices in early 2015 the country faced a drastic fall in revenues of the US currency along with commodities.
In addition, the government has not made policy changes to adapt to the low petroleum price. In early 2016, the Washington Post reported the official price of state-retailed petrol was below US$.01 per gallon, and the official state currency exchange rate valued the US dollar at 1/150th what the black market did.
Housing
Since the mid-2000s during Chávez's presidency, Venezuela suffered from a housing crisis. In 2005, the Venezuelan Construction Chamber (CVC) estimated that there was a shortage of 1.6 million homes, with only 10,000 of 120,000 promised homes constructed by Chávez's government despite billions of dollars in investments. Due to the shortages, poor Venezuelans attempted to construct homes on their own despite structural risks.
By 2011, Venezuela suffered from a housing shortage of 2 million homes, with nearly twenty prime developments being occupied by squatters following Chávez's call for the poor to occupy "unused land". Up to 2011, only 500,000 homes were constructed under Chávez, with over two-thirds of the new housing developments being built by private companies while the Government provided about the same amount of housing as previous administrations. Housing shortages were further exacerbated when private construction halted due to the fear of property expropriations and because of the Government's inability to construct and provide housing. In a July 2011 article by The Guardian, urban theorist and author Mike Davis wrote, "Despite official rhetoric, the Bolivarianist regime has undertaken no serious redistribution of wealth in the cities and oil revenues pay for too many other programmes and subsidies to leave room for new housing construction". By 2012, the shortage of building materials had also begun to disrupt construction, with metal production at a 16-year low. By the end of Chávez's presidency in 2013, the number of Venezuelans in inadequate housing had grown to 3 million.
Under the Maduro government, housing shortages continued to worsen. Maduro announced in 2014 that due to the shortage of steel, abandoned cars and other vehicles would be acquired by the government and melted to provide rebar for housing. In April 2014, Maduro ruled by decree that Venezuelans who owned three or more rental properties would be forced by the government to sell their rental units at a set price or they would face fines or have their property possessed by the government. By 2016, residents of government-provided housing, who were usually supporters of the Government, began protesting due to the lack of utilities and food.
Venezuelan debt
According to the Central Bank of Venezuela, the foreign debt of the Venezuelan state in 2014 is divided into:
- Venezuelan public debt: it represents 55% of the total and is what is owed in terms of domestic and foreign debt bonds, treasury bills and bank loans.
- PDVSA's financial debt, representing 21% of the total.
- Foreign debt, representing 15% of the total, financing obtained through Chinese funds.
- CADIVI's debt, representing 9% of the total. It is CADIVI's non-financial debt (currencies for imports, dividends, income and services in general).
In November 2017, the Economist estimated Venezuela's debt at US$105 billion and its reserves at US$10 billion.
Shortages
Shortages in Venezuela have been prevalent following the enactment of price controls and other policies during the economic policy of the Hugo Chávez government. Under the economic policy of the Nicolás Maduro government, greater shortages occurred due to the Venezuelan government's policy of withholding United States dollars from importers with price controls.
Shortages occur in regulated products, such as milk, various types of meat, chicken, coffee, rice, oil, precooked flour, butter prices; and also basic necessities like toilet paper, personal hygiene products and medicine. As a result of the shortages, Venezuelans must search for food, occasionally resorting to eating wild fruit or garbage, wait in lines for hours and sometimes settle without having certain products.
Gross domestic product
In 2015 due to the crisis, the Venezuelan economy contracted 5.7% and in 2016 it contracted by 18.6% according to the Venezuelan central bank.
Venezuela has a strong dependence on oil, which generates about 96% of its export revenues. The fall in oil prices has occurred at a time when the South American country faces runaway inflation, which reached an annualized rate of 63.9% in November, and a severe scarcity of basic products.
In reference to the violent anti-government protests that shook Venezuela earlier this year and alleged plans to destabilize the country, which President Maduro said included smuggling and hoarding essential products, the central bank said that those "actions against the national order prevented the full distribution of basic goods to the population, as well as the normal development of the production of goods and services. This resulted in an inflationary upturn and a fall in economic activity".
Inflation
While the Venezuelan government "has essentially stopped" producing official inflation estimates as of early 2018, one estimation of the rate at that time was 5,220 percent (according to inflation economist Steve Hanke of Johns Hopkins University).
Inflation in 2014 reached 69% and was the highest in the world. In 2015, inflation was 181%, 800% in 2016 and over 4,000% in 2017.
Inflation has affected Venezuelans so much that in 2017, some people became video game gold farmers and could be seen playing games such as RuneScape to sell in-game currency or characters for real currency. In many cases, these gamers made more money than salaried workers in Venezuela even though they were earning just a few dollars per day. In the Christmas season of 2017, some shops would no longer use price tags since prices would inflate so quickly, so customers were required to ask staff at stores how much each item was.
Business and industry
At the beginning of the crisis, international airlines (which depart from Maiquetia international airport in Caracas) had problems getting their normal flights to and from Venezuela, and as a result, many airlines have left the country.
According to the International Air Transport Association (IATA), the Government of Venezuela retained 3.8 billion dollars from the airlines. As a result of this, the country lost business opportunities, aggravating the deep crisis that it suffered.
Airlines such as Air Canada, Alitalia, Lufthansa, among others, stopped service to the country, making the departure of the country even more difficult. Most other airlines reduced the number of flights and the size of the planes, in an effort to stay in the country.
Unemployment
As a result of the crisis, Venezuela suffered its highest unemployment rate in years. Due to the inflation and expropriations by the Venezuelan government to private companies, many others left the country, which in turn increased unemployment for those remaining.
Likewise, the salary increase at the end of 2016 (this being one of the supposed solutions of the government), brought with it the dismissal of half of the employees of large companies (Corpoelec, Imaseo, etc.).
In January 2016 the unemployment rate closed at 18.1 percent becoming the poorest economy in the world.
Corruption
Corruption in Venezuela is high according to Transparency International's (TNI) Corruptions Perceptions Index and is prevalent throughout many levels of Venezuela's society. In the case of Venezuela, the discovery of oil in the early twentieth century has worsened political corruption. While corruption is difficult to measure reliably, Transparency International currently ranks Venezuela among the top 20 most corrupt countries, tied with four other countries as the 8th most corrupt nation in the world. A 2014 Gallup poll found that 75% of Venezuelans believed that corruption was widespread throughout the Venezuelan government. Discontent with corruption was cited by opposition-aligned groups as one of the reasons for the 2014 Venezuelan protests.
Social crisis
Hunger
The annual "Venezuela's Living Conditions Survey" (ENCOVI) by three universities found nearly 75 percent of the population said they had lost an average of at least 8.7 kg (19.4 lb) in weight due to a lack of proper nutrition in 2016 and 64% said they lost 11 kg (24 lbs) in 2017. When the price of petroleum was high, Venezuela became dependent on food imports, and once the price declined the government became unable to afford the imports. According to Al Jazeera, following the fall in the price of petroleum, food rationing grew so severe that Venezuelans spent all day waiting in lines. Pediatric wards filled up with underweight children, and formerly middle-class adults began possibly picking through rubbish bins for scraps.
According to the head of waste collection in the city of Maracaibo, Ricardo Boscan, 6 out of every 10 garbage bags or trash cans are being looted by hungry people. Other signs of hunger in Venezuela include the killing of dogs, cats, donkeys, horses and pigeons--whose dismembered remains are found in city garbage dumps--and of protected wildlife such as flamingos and giant anteaters.
Corruption is a problem in the distribution of food. According to an operations director at one food import business, "You have to pay for [the military] to even look at your cargo now. It's an unbroken chain of bribery from when your ship comes in until the food is driven out in trucks." While using the military to control food distribution has "drained the feeling of rebellion from the armed forces" by giving soldiers access to food denied others, the resulting corruption has increased shortages for the general public.
Doctors at "21 public hospitals" across 17 Venezuelan states told investigators of the New York Times in 2017 that "their emergency rooms were being overwhelmed by children with severe malnutrition -- a condition they had rarely encountered before the economic crisis began", and that "hundreds have died". The government has responded with "a near-total blackout of health statistics, and by creating a culture in which doctors are often afraid to register cases and deaths that may be associated with the government's failures".
Crime
Escalating violent crime, especially murder, had been called "perhaps the biggest concern" of Venezuelans during the crisis. According to the think tank Observatory of Venezuelan Violence, 27,875 homicides were committed in Venezuela in 2015, a rate of about 90 per 100,000 people (compared to 5 per 100,000 for the US). According to The New Yorker magazine Venezuela has, "by various measures, the world's highest violent-crime rate". Less than two percent of reported crimes are prosecuted. According to the Los Angeles Times,
carjack gangs set up ambushes, sometimes laying down nail-embedded strips to puncture tires of vehicles ferrying potential quarry. Motorists speak matter-of-factly of spotting body parts along roadways. ... While most crime victims are poor, they also include members of the middle and upper classes and scores of police and military personnel killed each year, sometimes for their weapons. ... "Before the thieves would only rob you," is a common refrain here in the capital. "Now they kill you."
A reporter for The New Yorker magazine found that even stairwells in a public hospital in the city of Valencia were not safe from robbers, who preyed on staff and patients despite the large number of National Guard, local and national police, and militia guarding the hospital. This was because the police were assigned to guard the hospital from journalists who might embarrass the government with exposés on the state of the hospital; they were not assigned to protect its occupants. The police allegedly collaborated with the robbers receiving a cut of what they stole.
Emigration
Millions of Venezuelans have voluntarily emigrated from their native country during the presidencies of Hugo Chávez and Nicolás Maduro, in contrast to Venezuela's high immigration rate during the 20th century. Emigration has been motivated by economic collapse, expansion of state control over the economy, high crime, high inflation, general uncertainty, and lack of hope for a change in government. The PGA Group estimates more than 1.5 million emigrated from Venezuela from 1999 to 2014 but an estimated 1.8 million left in 2015 alone. In the first part of 2018, emigration from Venezuela was estimate to average 5000 a day.
In 1998, the year Chávez was first elected, only 14 Venezuelans were granted U.S. asylum. In just 12 months in September 1999, 1,086 Venezuelans were granted asylum according to the U.S. Citizenship and Immigration Services. Chávez's rhetoric of redistributing wealth to the poor concerned wealthy and middle class Venezuelans, resulting in the first wave of the Veneuelan diaspora fleeing the Government. A May 2002 cable from the United States Embassy at Caracas to United States agencies expressed astonishment at the number of Venezuelans attempting to enter the United States, stating, "This drain of skilled workers could have a significant impact on Venezuela's future".
Academics and business leaders have stated that emigration from Venezuela increased significantly during the final years of Chávez's presidency and especially during the presidency of Nicolás Maduro. This second wave of diaspora consisted of lower class Venezuelans suffering directly from the economic crisis facing the country; thus, the same individuals whom Chávez attempted to aid were now seeking to emigrate, driven by worsening economic conditions, scarcity of food and medicine, and rising rates of violent crime. It has been estimated that in the year 2016 alone, over 150,000 Venezuelans emigrated from their native country, with The New York Times stating that it was "the highest in more than a decade, according to scholars studying the exodus". Venezuelans have opted to emigrate in various ways, though images of Venezuelans fleeing the country by sea have also raised symbolic comparisons to the images seen from the Cuban diaspora.
Health care
Following the Bolivarian Revolution, the new government initiated the installation of free healthcare, and assistance from Cuban medical professionals providing aid. The government's subsequent failure to concentrate on healthcare for Venezuelans, the reduction of spending on healthcare, as well as unchecked government corruption eventually resulted in avoidable deaths due to severe shortages of medical supplies and equipment, and the emigration of medical professionals to other countries.
Venezuela's reliance on imported goods and the complicated exchange rates initiated under Hugo Chávez led to increasing shortages during the late 2000s and into the 2010s that affected the availability of medicines and medical equipment in the country. By 2010, the Government stopped publishing medical statistics. Throughout Chávez's presidency, the Health Ministry changed ministers multiple times. According to a high-ranking official of Venezuela's Health Ministry, the ministers were treated as scapegoats whenever issues with public health arose in Venezuela. The official also explained how Health Ministry officials would also perform illicit acts in order to enrich themselves by selling goods designated to public healthcare to others.
Into the Maduro presidency, the Government could not supply enough money for medical supplies among healthcare providers, with doctors saying that 9 of 10 of large hospitals had only 7% of required supplies and private doctors reporting numbers of patients that are "impossible" to count dying from easily treated illnesses due to the "downward sliding economy" in 2014. Due to such complications, many Venezuelans died avoidable deaths with medical professionals having scarce resources and using methods that were replaced decades ago. In February 2014, doctors at University of Caracas Medical Hospital stopped performing surgeries due to the lack of supplies, even though nearly 3,000 people require surgery.
In 1961, Venezuela was the first country declared free of malaria. As of 2016 its malaria-prevention program had collapsed, and there are more than a hundred thousand cases of malaria yearly. By August 2014, Venezuela was the only country in Latin America where the incidence of malaria was increasing, allegedly due to illegal mining and in 2013, Venezuela registered the highest number of cases of malaria in the past 50 years, with 300 of 100,000 Venezuelans being infected with the disease. Medical shortages in the country hampered treatment. Shortages of antiretroviral medicines to treat HIV/AIDS affected about 50,000 Venezuelans, potentially causing thousands of Venezuelans with HIV to develop AIDS.
In late 2014, Venezuelans began saying that due to shortages of medicines, it was hard to find acetaminophen to help alleviate the newly introduced chikungunya virus, a potentially lethal mosquito-borne disease. In September 2014, the Venezuelan government stated that only 400 Venezuelans were infected with chikungunya while the Central University of Venezuela stated that there could be between 65,000 and 117,000 Venezuelans infected. In August 2015 independent health monitors said that there were more than two million people infected with chikungunya while the government said there were 36,000 cases.
By early 2015, only 35% of hospital beds were available and 50% of operating rooms could not function due to the lack of resources. In March 2015, a Venezuelan NGO, Red de Medicos por la Salud, reported that there was a 68% shortage of surgical supplies and a 70% shortage of medicines in Venezuelan pharmacies. In May 2015, the Venezuelan Medical Federation said that 15,000 doctors had left the public health care system because of shortages of drugs and equipment and poor pay. In August 2015 Human Rights Watch said "We have rarely seen access to essential medicines deteriorate as quickly as it has in Venezuela except in war zones". By the end of 2015, the Government reported that of all Venezuelans visiting public hospitals in the year, one out of three patients died.
In 2016, infant mortality increased 30.12% to 11,466 deaths, maternal mortality increased 65.79% with 756 deaths and malaria increased 76.4% to 240,613 cases. Cases of diphtheria, which was thought to have been eradicated from Venezuela in the 1990s, had also begun to reappear in the country during the year. Other diseases like malaria, "nearly eradicated in many countries" have flourished; "illnesses largely new to the area, like Chikungunya, Zika, and dengue, have spread". One study of 6,500 households found that "74% of the population had lost on average nineteen pounds in 2016".
Shortly after the 2016 health statistics were released to the public in May 2017, President Maduro replaced Minister of Health, Dr. Antonieta Caporale, with a pharmacist close to vice-president Tareck El Aissami, Luis López Chejade.
Public opinion
In a November 2016 survey by Datincorp, Venezuelans living in urban areas were asked which entity was responsible for the crisis, with 59% stating that President Chávez (25%), President Maduro (19%) and chavismo (15%) were the causes, while 16% blamed the opposition (10%), entrepreneurs (4%) and the United States (2%).
Political crisis
Protests and recall movement
Discontent with the Government saw the opposition being elected to hold the majority in the National Assembly for the first time since 1999 following the 2015 parliamentary election.
The political crisis was unleashed in October 2016 when at least six lower Venezuelan state criminal courts declared void the previous processes of collecting signatures in their states. As a consequence, the National Electoral Council declared the end of the national referendum for the removal of Nicolás Maduro from the presidency of Venezuela, following previous opinions of the Supreme Court of Justice.
The Venezuelan opposition, through the Bureau of Democratic Unity, announced in reaction a peaceful demonstration at the national level, called "Venezuela takeover", to be held throughout the country from Wednesday 26 October 2016 and with indefinite duration. Finally, the opposition announced the "March to Miraflores" to be held on Thursday, November 3, 2016 concentrated in Caracas at the Miraflores Palace.
Likewise, the Venezuelan National Assembly, which had been declared "in contempt" by the Venezuelan Supreme Court, declared the "rupture of the constitutional order" in Venezuela in an extraordinary session. On October 25, the National Assembly debated the possibility of bringing Maduro to trial for his responsibility in adopting the decision of the lower court, and its application as a national decision to suspend the recall referendum, though the Constitution does not grant this power to the legislature.
Following the 2017 Venezuelan constitutional crisis, and the push to ban potential opposition presidential candidate Henrique Capriles from politics for 15 years, protests grew to their most "combative" since they began in 2014.
Constitutional assembly
On 1 May 2017 following a month of protests that resulted in at least 29 dead, Maduro called for a Constitutional Assembly that would draft a new constitution that would replace the 1999 Venezuela Constitution. He invoked Article 347, and stated that his call for a new constitution was necessary to counter the actions of the opposition. The members of the Constitutional Assembly were not be elected in open elections, but selected from social organizations loyal to Maduro. It would also allow him to stay in power during the interregnum and skip the 2018 presidential elections, as the process would take at least two years.
The opposition started a common front for all the people in Venezuela that oppose the amendment. On 20 June 2017, President of the National Assembly Julio Borges, the opposition-led legislative body of Venezuela, announced the activations of Articles 333 and 350 of the Venezuelan Constitution in order to establish new parallel government.
Constituent Assembly elections were held on 30 July 2017. The decision to hold the election was criticised by members of the international community, with over 40 countries along with supranational bodies such as the European Union, Mercosur and the Organization of American States condemning and failing to recognize the election, stating it would only further escalate tensions. President Maduro's allies -- such as Bolivia, Cuba, El Salvador, Nicaragua, Russia and Syria -- discouraged foreign intervention in Venezuelan politics and congratulated the president.
The 2017 Constituent Assembly of Venezuela was officially sworn in on 4 August 2017.
On August 11, 2017, U.S. President Donald Trump said that he is "not going to rule out a military option" to confront the autocratic government of Nicolás Maduro and the deepening crisis in Venezuela. Venezuela's Defense Minister Vladimir Padrino immediately criticized Trump for his statement, calling it "an act of supreme extremism" and "an act of madness". The Venezuelan communications minister, Ernesto Villegas, said Trump's words amounted to "an unprecedented threat to national sovereignty".
References
Source of article : Wikipedia
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