Falling oil prices put Venezuela's Nicolás Maduro in a vice
By Nick Miroff November 17 at 3:30 AM
CARACAS, Venezuela — Six months ago, Venezuelan President Nicolás Maduro
faced bloody protests demanding his resignation. The streets were
clogged with flaming barricades. By the time the smoke cleared, dozens
of protesters and national guardsmen were dead, and Maduro's government
was widely assailed for rights abuses.
Those were the good old days.
Venezuelan oil, the lifeblood of the leftist revolution entrusted to
Maduro by the late Hugo Chávez, was worth $97 a barrel then. Now it's
middling around $70, and with every dollar it dips, Venezuela's
export-dependent, popularity-challenged government loses $700 million a
year.
With the money pot shrinking, Maduro's approval rating has slumped to 30
percent, according to recent surveys, down from 55 percent in April
2013. The supermarket scarcities and unchecked crime that fueled the
protests earlier this year are as bad as ever.
Loath to adopt austerity measures that would hit his softening support
base, Maduro has been borrowing money from Wall Street at usurious
rates, with the country's plunging benchmark bonds hitting a six-year
low last week.
All of this has left friends and enemies alike wondering how long the
government can go on until something snaps, especially if oil prices
slip further. Venezuela's desperate attempts to get fellow OPEC states
to cut production have failed to sway the mighty Saudis. The cliff seems
closer than ever.
"It's as if Maduro is playing one of those zombie video games," said
analyst Luis Vicente Leon, director of the leading polling firm
Datanalisis. "As the zombies come at him, he shoots one here, another
there, but more and more keep arriving until they're on top of him."
Stalking Maduro are Venezuela's long-festering core problems —
collapsing productivity and Chávez-era currency controls that have
pushed inflation to 63 percent, one of the world's highest rates.
New lines of credit from the world's other big lender, Beijing, aren't
likely, with China growing frustrated with Venezuelan mismanagement,
said Francisco Monaldi, a Venezuelan economist who is a visiting
professor at Harvard's Kennedy School of Government.
Maduro can still keep fiscal calamity at bay, analysts say, but he's
shown little appetite for the unpalatable political moves that it will
require.
His government could sell off valuable assets, particularly the U.S.
gasoline retailer Citgo and its affiliated network of refineries and
pipelines. He could also further cut subsidized oil shipments to key
allies such as Cuba and Nicaragua.
The most obvious measures for Maduro to take, and those likely to have
the most meaningful fiscal impact, would fall hardest on the poor
Venezuelans who revered Chávez but have grown skeptical of his understudy.
Maduro has refused to devalue Venezuela's currency, the bolivar, instead
setting up a complex exchange system with three separate rates for U.S.
dollars. The base rate is 6.3 to the dollar. The tourist rate is 12.
Then there's a third rate meant for importers and other businesses that
trades at 50 bolivars to the dollar.
But on the black market, where most of the money moves, a dollar is now
worth 120 bolivars, double its value from earlier this year. When
Venezuela's finance minister said last week that the government had no
plans to devalue the bolivar, the currency dropped 20 percent almost
overnight.
Not surprisingly, the gaps in Venezuela's four-tiered exchange system
have been filled by all manner of currency swappers, scammers, hoarders
and smugglers, creating one of the country's few growth industries.
Wealthier Venezuelans with access to dollars are big winners, while the
poor have seen the cost of basic foodstuffs double this year, outpacing
the periodic increases to the minimum wage decreed by Maduro.
There's no painless fix. Adjusting Venezuela's currency controls to
bring the bolivar in line with the black market value of the U.S. dollar
could be politically disastrous for Maduro, since it would further slash
the wages of Venezuelans who don't have their savings stockpiled in U.S.
banknotes.
A more palatable move may be a long-deferred hike of the world's lowest
gas prices — equivalent to less than a penny per gallon. The giveaway
costs the government approximately $7 billion a year, and amounts to a
huge subsidy for the wealthier Venezuelans who favor gas-gulping SUVs.
Venezuela — where there's no stigma to leaving the lights on or an air
conditioner running with the windows open — consumes more energy per
capita than any other South American country, and raising the price of
fuel could, finally, spur energy conservation here.
Yet Maduro has shown little inclination to ask his supporters for
sacrifices. "With Chávez they were willing to do it because they thought
the future would be better," said Leon, the Datanalisis president. "With
Maduro, it's not clear that's the case."
Instead, Maduro is channeling Santa. He announced a new "Happy Holidays"
campaign this month, ordering retailers to sell Barbie dolls at huge
discounts and set up a military-run appliance sale where shoppers line
up for 80 percent markdowns on microwaves, computer tablets and other
big-ticket items. Such fire sales have become a magnet for "re-sellers"
who can easily flip the goods on the black market, and the scenes of
buyers lining up for days has done little to lift the pall of consumer
anxiety.
The government's fiscal profligacy is compounded by a kind of paralysis
at the top levels, where internal battles are said to rage between those
urging greater discipline and more radical Chávez followers who want the
government and the military to take over more of the economy.
Dimitris Pantoulas, a Caracas-based political analyst who is close to
current and former government insiders, says that 14 years of Chávez's
unquestioned authority have given way to something fuzzier since his
March 2013 death from cancer.
"The top leaders of the government are more like a collective," said
Pantoulas, adding that for mid-level officials, their debates can sound
like "a cacophony."
"It's not like before when it was only Chávez," he said.
At the top with Maduro is national assembly president Diosdado Cabello,
a powerful figure with closer ties to the military but a dark reputation
among both government opponents and quite a few Chávez followers
suspicious of his business ties.
With a Jacobean touch, the dour Cabello and other top government figures
this month have taken to the airwaves to denounce anti-Chávez
"infiltrators" within the ruling United Socialist party.
"The enemy who most harms us is the enemy within our ranks," said
Francisco Ameliach, a high-ranking socialist party member and state
governor. "It's the one who calls himself 'Chávista' but is not
'Chávista.' " He tweeted out a hotline number and a Gmail address for
reporting any traitorous activity.
Venezuela's beleaguered opposition hasn't had much success capitalizing
on the divisions in the Chávez ranks, and still struggles with its own
fissures between Governor Henrique Capriles, who narrowly lost to Maduro
in the last presidential election, and Leopoldo Lopez, the jailed
protest leader whose popularity has risen while the government
prosecutes him for inciting violence.
The street protests fizzled out months ago, and Venezuelans are now
looking ahead to parliamentary elections next year that have yet to be
scheduled.
Analysts say that contest could either put the government on a more
radical path or bring a political upheaval that could pave the way for a
recall referendum against Maduro in 2016.
Nick Miroff is a Latin America correspondent for The Post, roaming from
the U.S.-Mexico borderlands to South America's southern cone. He has
been a staff writer since 2006.
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