The past two years have been of deep transformation for Venezuela. Ahead of a new negotiation cycle, here’s where we stand today.
By Caracas Chronicles – Rafael Osío Cabrices and Raúl Stolk
Aug 11, 2021
The second anniversary of Cinco8, CC’s Spanish language sister site, was a great opportunity to take two steps back and look at Venezuela’s transformation in the last couple of years. Although we usually write a yearly balance on the state of things in the country, we’re seeing these two years as a block that completely changed the power dynamics and the economy of the country. It may be bold to state this in 2021, but when we consider that the country was in an apparently stagnant situation by the end of 2018, Venezuela was probably one of the countries that changed the most in this time frame. Venezuela aged twenty years in just two: 2019 was the year of the national blackout, Juan Guaidó’s power play, a Pythonesque insurrection, and the advent of the unofficial dollarization; and 2020 was the year of the pandemic. Venezuelans went from having a murky shade of hope and a fragile collective enthusiasm for the possibility of democratic reconstruction to rock-hard resignation.
This year, the regime teases Venezuelans with the idea of an open economy while it continues to enforce its violent grip on power; and the opposition seems to be herded, by many different actors, towards a change of strategy. This mix of circumstances along with some very particular developments in Venezuela has turned our view of the world we live in upside down, as well as the mere understanding of who we are.
Ahead of a new negotiation cycle (sheesh), here’s where we stand today.
The Main Worry
The last thing you can say about Venezuela’s economy today is that it’s functional. The government just announced the third currency redenomination of the chavista era, as we all expected, which would bring us a new incarnation of the bolivar in October: the “bolivar digital”. Hyperinflation is still hyper, over 5,000 percent in 2021, according to the IMF if we consider the price variation expressed in bolivars—but with a few key variations.
Today, we are mostly talking about “inflation in U.S. dollars,” which is plain old inflation, and about how this has severed the value of remittances and increased inequality in Venezuela—which was already massive. Dollarization, must be said, has stimulated a timid, fragile, income recovery for some Venezuelans, as well as some interesting stories of entrepreneurship. Through imports and the reactivated production of some domestic manufacture, food shortages have decreased.
However, food insecurity is still there. Besides the low purchasing power of millions of people, farm-to-market supply chains are usually threatened by fuel shortages. Because all attempts of economic recovery in Venezuela, and the mere struggle to survive, are still restricted by the country’s energy deficit. The decline of the oil industry and the power infrastructure keep the population paying asphyxiating costs in money and time to get gas for their cars and trucks. Trees and bushes are being used to provide firewood for households unable to find cooking gas. A nationwide blackout as the one in March 2019 hasn’t happened again, but people outside Caracas have to endure long hours without power, or even days. This means no fridges to store food, no internet, no phone, no pumps for water, no fans or air conditioners, no work, no study. There’s no way of getting a nation on its feet without reliable, continuing electricity.
Any discussion on reactivation in Venezuela must start by assessing the status of oil production, which isn’t easy. Some sources say they have barely surpassed the barrier of 500,000 barrels per day; while others say they are producing more than 600,000.
Venezuela is now a shadow of the hydrocarbon powerhouse it once was. 2021 started with a promise of economic opening and privatization of the oil industry, but that hasn’t happened so far. You’d say that no one must be surprised when chavismo doesn’t honor a promise, and you’d be right, but in this case, it was the regime’s international partners (Russia, Iran, and China) who were taken by surprise, countries that were pressuring for increased participation in oil projects with lower interaction with the Venezuelan State. What we’ve seen are very few changes on the board, where previous players are being replaced by these new partners. A clear example of this is the recent announcement that Equinor and Total are leaving Petrocedeño.
The Mirage of Reconstruction
Even in this economic context, dollarization has driven consumption and an illusion of stabilization—what political scientist Guillermo Aveledo Coll calls Pax Bodegónica, alluding to the stores selling Nutella, Ben & Jerry’s, and Stella Artois—and even a climate of economic reconstruction, made more of expectations and desire, if not pure and simple wishful thinking. Yes, the Caracas Stock Market is working, but with meager returns. Yes, there’s some investment coming from Miami, but it’s from groups of Venezuelan investors purchasing old companies depleted of their value during the economic catastrophe. At the end of the day, the Maduro regime refuses to relinquish control, on behalf of ideological dogma or because of political interest, and the sanctions are the official explanation for everything. Most of all, the regime doesn’t want anyone to think it’s going to lose its grip on the country, as was shown by Delcy Rodríguez’s attitude at the FEDECÁMARAS business chamber annual assembly.
In reality, the promise of a free-market economy is no more than a political marketing tool to counterbalance the political violence of the State, by feeding the belief in an eventual metamorphosis of the chavista regime into a pragmatic autocracy. This seems to be embraced by more people every day. In the meantime, the absence of a formal economic reform keeps pumping a bubble economy, where many people depend on services – that imitate those of the developed world – to tiny domestic consumption markets where most of the wealth of the country is accumulated.
The sources of wealth in Venezuela have shrunk dramatically, and what is being distributed reaches just a few and is diminishing. According to the IMF, the country lost 3 % of its GDP in 2020 and will lose 10 % in 2021.
The Double Layer of Covid and Sanctions
It’s difficult to discern the impact of international sanctions on the Venezuelan economy when the pandemic is hitting it at the same time. Both factors reduce Venezuela’s already thin interconnection with the rest of the world, and are systematically manipulated by the propaganda apparatus to hide the facts from public knowledge and accountability, and to produce narratives in the regime’s interest.
However, there are some things we can agree on regarding sanctions: they have caused problems to the state-owned oil industry (all but totally dismantled before the sanctions arrived, let’s not forget that). They are making it more difficult to produce and import fuel; they have no impact on the bodegón economy; and they have no impact on imports of medicine. Also, and perhaps less agreed upon, sanctions were probably important factors in forcing the government to lift or waive some economic control measures, when it found itself unable to sustain the subsidized economy. And on the political arena, although sanctions didn’t shatter the ruling alliance, they may be the only reason pushing the regime to accept a new negotiation.
Normalizing the Suffering
Apparently, Venezuelans normalized COVID-19 as they’ve with so many other problems. The country is still enduring a complex humanitarian emergency, and people are still dying of preventable diseases. In fact, the coronavirus crisis has hidden parallel challenges such as the spread of malaria and the delay of surgical interventions and treatments.
People find medicine more easily, but now the problem is that it’s too expensive, and health has been privatized with incredible speed. One day in a private hospital to treat COVID-19 can cost over 1,000 dollars. We think there’s more humanitarian assistance than in August 2019 – the UN food relief agency was finally authorized to operate in Venezuela. However, NGOs are under threat and international aid is far from being enough. The pandemic made the logistics of humanitarian assistance, like importing supplies or distributing them, even more complicated.
Even more difficult to assess is the social impact of the combination of this weird economy, the sanctions and the pandemic. How could we measure the effect on so many kids that have not attended school or college since the first half of 2020? How could we measure the effect, on their present and their future, of those kids left behind by parents who emigrated?
Yes, the economy could have improved in some aspects since 2019, but the social catastrophe is intact. The murders of girls and women increased during the pandemic, as well as domestic violence, something also registered in many different countries. Violence persists.
El Koki As a Symbol
The sense that crime has declined began to dissipate with the constant challenge of the mega gangs in the northeastern and southwestern tips of Caracas: Petare and the Cota 905. The State has been dealing with these mega gangs for years; how they affect the regime is something that could only be estimated on a local basis. Depending on the place, those criminal organizations are the government’s ally or foe. But the gang led by a.k.a. El Koki is unique as a symbol of the paradox: the Maduro regime is able to suffocate protest and subjugate the opposition, but is unable to neutralize an adversary that insists on defying security forces not far from Miraflores Palace.
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Read More: Caracas Chronicles – This is the Venezuela that’s heading into a new negotiation cycle
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