Venezuela's Political and Economic Crisis Explained

Venezuela was once one of the most prosperous nations in Latin America, being the country with the largest proven oil reserves in the world. Now, there is no single day where we do not hear the news highlighting Venezuela’s current situation: one of severe economic, political and humanitarian crisis. But what were the determinant factors that led to Venezuela’s downward spiral? Is there any hope to Venezuelans for a better future?

First, let’s focus on the main issues which together led Venezuela to its economic and political ruin. Venezuela’s economy has been highly dependent on oil export’s revenues since its discovery in the 1920s, accounting for 98% of exports earnings and representing 50% of its GDP. Other sectors of the economy, such as industry, manufacturing and agriculture were never really developed in Venezuela, which left its economy greatly vulnerable to oil prices swings worldwide. Consequently, it was not a surprise that when the price of a barrel fell from more than $100 in 2014 to approximately $30 in 2016, Venezuela’s economy suffered an intense recession. Currently, the price of oil is trading at $52 a barrel.

In terms of Venezuela’s political situation, this one should be explained by looking back and analysing the political timeline. Starting in 1999, when Hugo Chavez was elected president of Venezuela, on the pledge of socialist reforms which would diminish social inequalities and poverty. Chavez was very popular among Venezuela’s working class, due to its charismatic personality and for successfully cutting the poverty rate by 20%, funding all his social plans with oil revenues. However, in the last years of his presidency, which ended in 2013, Chavez was implementing more and more authoritarian measures, such as ending term limits, assuming power over the Supreme Court and controlling the media and the press. In fact, he was opening the way to the dictatorial government leadership led by his successor, Nicolás Maduro, who was elected in April 2013, winning by a thin margin of 1.6%.

At the time Maduro started his presidency, oil prices suddenly dropped, which meant the social programmes implemented could no longer be sustained, resulting in rising poverty levels and hyperinflation. As the popularity of Maduro among the Venezuelans was decreasing, he allied with the military forces so that we would not lose his power.

In fact, Maduro gave the army access to a special currency rate, by which 10 bolivars were equivalent to $1, when, in reality, the population would have to pay 12,163 bolivars to get $1. Consequently, the army would profit from this currency crisis by controlling food supplies and selling it to the population at a higher price. Maduro’s strategy for consolidating power included political oppression, censorship and electoral manipulation. In May 2018, he won re-elections for a further 6-years term in highly controversial elections, where most opposing parties were boycotted and not able to participate. These elections were considered unfair and undemocratic around the world and Maduro has been considered a usurper ever since. Since the National Assembly argued that the role of president was therefore vacant, Juan Guaidó declared himself the acting president on the 23 rd January of 2019. In practical terms, however, Juan Guaidó does not hold much power, as the National Assembly was replaced by the National Constituent Assembly, which is formed by government loyalists, by Maduro in 2017. All these events led to the political uncertainty and crisis that have been in place in Venezuela ever since.

How have other countries reacted to Venezuela’s political stalemate? On the one hand, the United States recognizes Guaidó as the interim president of Venezuela and is imposing sanctions in oil exports until Maduro passes his power to Guaidó. The European Union and other nations of Latin America argue that new elections should take place. On the other hand, China, Russia and Cuba are supporting Maduro’s presidency.

The consequences of this political and economic uncertainty have resulted in a much worse humanitarian crisis. Hyperinflation reached 1,300,000% in the 12 months up to November 2018, leaving the population unable to afford food, medical supplies and basic items. Public schools and hospitals have closed or are operating in inhuman conditions. Nearly 3 million Venezuelans have emigrated since 2014 in the hope of finding a better future. No one really knows what is going to happen from now on, if Maduro is eventually going to renounce his leadership and turn over his power to Guaidó or if he will continue to fight for his political control. It is, however, the population of Venezuela, the most affected group in this situation and their hopes for a better future are currently almost null.