Venezuela’s economic and political woes

Once considered the richest country in South America, Venezuela is now gripped by an ever-deepening crisis, both economic and political, assuming very serious proportions. A record high inflation and shortages of food, medicine and other basic amenities have brought the country's economy to the verge of collapse. There have been violent street protests at the government's various controversial moves to maintain its hold on power. There are now demands for urgent economic reforms and an end to President Nicolas Maduro's 'authoritarian rule'.

It is difficult to comprehend that a country which has more oil underground than Saudi Arabia could go down this road, that ordinary people have to queue and wait for hours for food and other daily provisions. Yet, not so many years ago, Venezuela was providing economic and financial help to its neighbouring countries, including Cuba.

Ever since the late Hugo Chavez assumed power in 1999, Venezuela has enjoyed a thriving economy. There was a massive reduction of poverty, and there was huge investment in improving infrastructure, including roads and education. The price of oil at that time hit around $100 a barrel. Chavez also gave huge sums of state money bringing short-term benefits to the common people. But oil prices plummeted in the international market and this, in turn, brought untold miseries to the country's economy. The cost of extraction of oil is very high in Venezuela, and with a fall in prices, production had to be curtailed or stopped. The situation took a turn for the worse as the oil industry also lacks both technical expertise and foreign investment.

Both the Chavez and, subsequently, his chosen successor Maduro's governments sacked experts who were replaced by people completely loyal to them in the oil industry. When foreign investment in the oil sector was nationalized, investors naturally lost interest in Venezuela. The oil industry now can no longer support the economy and the massive oil revenues earned were not properly invested but squandered.

Added to this was the adverse effect of the price controls instituted by the government. With the fall in oil prices, it became impossible to sustain food subsidies, thus leading to hyperinflation. Experts say that inflation at the end of last year was running at 800% with a prediction of it getting in excess of 2000% by the end of this year. The country is now down to its last $10 billion dollars in foreign reserves, and the forecast for outstanding debt payments is around $7 billion dollars. That is how dreadful the economic situation of such an affluent country has now turned into.

But this is only half of the sorry state of affairs. The country has been absorbed in deep political turmoil in recent weeks with public protests on the streets, resulting in the deaths of nearly 40 people.

Although the opposition won a majority in the National Assembly in 2015, the Supreme Court has openly blocked parliament from passing major legislation. This effectively made the National Assembly redundant. The government went as far as cancelling a referendum process in October 2016 which was allowed by the Constitution. There was criticism that the government of President Nicolas Maduro, who assumed power after the death of Hugo Chavez in 2013, was moving in an authoritarian direction. In late March this year, the Supreme Court issued a ruling dissolving the National Assembly and assuming all legislative powers. In the face of vehement protests, it had to reverse it only a few days later, albeit only partially. Even Maduro's Attorney General criticised him openly, describing his actions as totally unconstitutional.

A leading opposition leader and two-time presidential candidate, Henrique Capriles, was disqualified from active politics and barred from contesting elections for 15 years. The grounds presented for this action were very flimsy, to say the least. All these actions led to the backlash that was expected and also led to calls for Maduro to quit office. The street protests became increasingly violent with the protesters accusing the President of eroding democracy in Venezuela.

President Maduro, in an effort to solve the crisis, laid out a plan for fresh elections to the National Assembly, which will draw up a new Constitution for the country. But the opposition immediately declined to be any part of this plan. The violent protests continued unabated.

The plan has also drawn criticism from other South American countries, notably Mexico, Brazil, Peru and Chile. The United States, blamed by President Maduro as being behind the anti-Maduro movement, is now taking a tougher attitude towards the Venezuelan regime. The US Ambassador to the UN, Nikki Haley, while criticising the Venezuelan President called for the release of all 'political prisoners'.

President Maduro is desperately trying to cling to power, but in order to do this, earning the support of the military is vital. But, in an environment of economic misery, the support of the military may not be forthcoming. It is a known fact and history has repeatedly taught the lesson that maintaining a military-backed regime and pointing the gun at your own people are impossible to sustain. Even protesters at anti-government demonstrations addressed soldiers, asking them to 'join the protest, join the fight'.

Venezuela is passing through some uncertain times. When this oil-rich country will return to its heydays is anybody's guess. One can only say that in the prevailing circumstances things can only get worse before getting any better.