CARACAS (ViaNews) – Venezuela’s unprecedented collapse continues. It seems almost unthinkable for a country that not so long ago was considered an emerging market, according to the IMF, and with the biggest oil reserve in the world, to be in such difficult position, but it’s happening.
In this South American country, the incredible is common and the improbable is routine. Venezuela has turned into the best explanation of magic realism, the mid-twentieth literary movement born in Latin America led by writers like Gabriel García Márquez, Juan Rulfo, and the Venezuelan Arturo Úslar Pietri. The extraordinaire and tragic yet laughable reality of Venezuelans includes daily power cuts of 6 hours or more, two-weeks water cuts, 12-hour lines for cash, 4-hour lines –if lucky, for gasoline, daily bribes to obtain documents at public entities, and more.
Venezuela is pure and hard magic –or extraordinaire, as Alejo Carpentier would say, realism. But is there light at the end of the tunnel? What is the immediate future of the country?
The future of the economy
“The assimilation process of the monetary reconversion has been something traumatic and chaotic for economic actors. If the government continues with its hostility on prices, the results will be even more dramatic”
Henkel García economic analyst and director of Econometrica
“I see economic collapse. Public workers are not going to work and the public sector is completely collapsing. There’s PSUV (United Socialist Party of Venezuela) inner pressure for results.” says Ángel Alvarado, deputy, and member of Primero Justicia (Justice First), an opposition political party.
Nicolás Maduro recently announced a group of measures of what he called an “economic recovery program” that included the increase of the minimum wage from ca. 5 million bolivars to 180 million bolivars, a subsidy of the minimum wage for 90 days, gasoline price’s increase, among other measures.
The most controversial and confusing measure has been a monetary reconversion that eliminated five zeroes to the bolívar. This means that 100 thousand bolivars are now 1 sovereign bolívar (as Maduro calls the “new” coin). All prices including wages, taxes, products, etc. have now 5 fewer zeroes, and a new group of bills was issued. This means, for example, that a kilogram of cheese, instead of costing 30 million bolivars, now costs 300 sovereign bolivars, and that the new minimum wage is now 1800 sovereign bolivars instead of 180 million of the “old” bolivars.
The adjustment plan has created confusion and uncertainty. Merchants don’t know how to set prices, inflation continues to rise, and people do not understand the new monetary reconversion.
“The assimilation process of the monetary reconversion has been something traumatic and chaotic for economic actors. If the government continues with its hostility on prices, the results will be even more dramatic”, Henkel García economic analyst and director of Econometrica, an economic advisory firm said to Via News.
“These measures are no adjustment “plan”, but are policies that greatly misadjust prices and salaries in both nominal and real terms”.
“Minimum wage is based upon a cryptocurrency without real value. There is an incredible fictitious liquidity rise due to inorganic currency emission. These are all smoke curtains to appear like an economic adjustment” says Ana Parra, political scientist and member of PolitiksVE, a political thought think-tank.
The consensus among political and economic analyst is that these policies, in the worst case scenario, will only heighten the crisis and in the best will only serve as a band-aid in the short term, before escalating the crisis.
“We’re going to end around that (about IMF projections of one million percent inflation projections”). The measures are just more of the same” says Ángel Alvarado.
Long lines at ATMs and banks continue as people try to obtain cash as in some markets the prices of the products are 3 or 4 times cheaper in cash than with debit or credit card.
Also, the government promised to pay the retirement pension for elders the past week in cash and many haven’t received it yet and have to wait from 3 or 4 AM to receive their payments.
All of this while the public services continue their collapse, more people starve, the inorganic emission continues and international pressure due to human rights violations and the humanitarian crisis increases.
“We’ll have very tough days, with few products available, high uncertainty and hesitation on how to set prices”, García says.
“There are many controls over the private entities; the measure to subsidize the minimum wage for three months only heightens this control as government intervention over the private economy is getting bigger as they are making them to be unsustainable and to need the State to exist”
Ana Parra, political scientist and member of PolitiksVE
Some even think the plan is a strategy to increase control over the private sector.
“It’s all planned. The collapse of the economy is the way they know they must follow to consolidate the nature of the regime: a radical-left, communist regime where private initiative is non-existent or, at least, highly controlled.
There are many controls over the private entities; the measure to subsidize the minimum wage for three months only heightens this control as government intervention over the private economy is getting bigger as they are making them to be unsustainable and to need the State to exist”, Parra declared to Via News.
Control over the private sector is not new, and amid all the chaos the government continues its continuous hostility towards the political opposition.
Less than a month ago they imprisoned Juan Requesens, a young deputy of Justice First who was one of the visible faces of the 2014 protests in Venezuela due to his alleged implication in the so-called attempt of magnicide with a drone against Nicolás Maduro. There has been several denounces of torture against him and other political prisoners.
That the government continues its political and economic offensive is shocking, but even more shocking for some has been the passivity of the opposition.
“I think their position could have been more emphatic, an active position defending the private sector, which in this case is, also, indirectly a defense of the worker and the common Venezuelan”, García said.
The reasons for this passivity are many. The main one is the slow yet incessant fragmentation of Venezuela’s opposition. Many parties have left the MUD, the biggest party coalition the opposition has been able to create.
With the development of last year’s protests, the divisions started to be evident. There were many different agendas and positions on critical issues.
The relations continued deteriorating when, after regional elections, some governor elect’s decided to swear in front of the National Constituent Assembly instead of the opposition-led National Assembly. Then, reached a complete breaking point when Henri Falcón unilaterally decided to face Nicolás Maduro in May’s presidential election when a majority of the opposition called to abstain due to mistrust in the process.
“We cannot speak about opposition fragmentation because this would mean they were united at a point, and I believe that is false.
Everyone has been following their own interests and now that we are in a critical moment, we can all see the divisions that were always there because the political context requires key decisions to be taken, and they haven’t been taken”, Parra says.
What’s coming next?
Ángel Alvarado believes that “in the end, total recovery requires returning to constitutional order”. Most of the opposition politicians, analysts, and even some disenchanted government supporters mistrust Maduro’s and his cabinet capabilities of correcting the course of the economy, as they believe that first, Venezuela must return to an environment of stability, rule of law and trust for inversion.
Government’s decisions seem as more of the same, so a real adjustment appears to be a long shot and the political repression rises on a daily basis.
The pressure for international involvement has increased. Trump’s cabinet and advisors seem to be slowly inclining towards an intervention, though many key allies as Colombian president Iván Duque do not believe that’s the best option.
Many Latin American countries, especially Brazil, have pressured for an end of the crisis and even the UN has declared there should have been earlier international pressure due to the possibility of a humanitarian crisis comparable only to the Syrian crisis.
What will happen next to Venezuela is a mystery. The only thing that seems certain is that the only way to improve the situation might be the inner pressure of the people, the bases of the official party and diplomatic or even military efforts.