- Emergency economic measures bill had been submitted last week
- Government, opposition congress unable to find common ground
President Nicolas Maduro failed to secure far-reaching powers he says he needs to address triple-digit inflation and Venezuela’s deepest recession in over a decade as the National Assembly on Friday refused to pass his emergency economic decree bill.
The decree, submitted by Maduro to congress on Jan. 15, would have granted the executive powers including oversight of the country’s budget, public and private production as well as distribution of essential goods. In elections last month, the opposition gained majority control of the legislature 16 years, upending the country’s longstanding balance of power. The bill was turned down in a 107-53 vote.
“The root of the problem is a failed model that has brought us to this situation,” opposition congressman Jose Guerra said as the bill was debated.
The latest dust-up comes just a week after the central bank released long-awaited data confirming the moribund state of Latin America’s fourth-largest economy: through the third quarter last year, inflation had surged to 141 percent while the economy shrank 7.1 percent. While the bill’s rejection was widely expected, concern is mounting that the institutional standoff will further weigh on the country’s fragile, oil-dependent economy at a time of historically low commodity prices.
“In such a severe economic crisis, the last thing Venezuela needs is a showdown between its public powers,” economist Asdrubal Oliveros, director of the Caracas consulting firm Econanalitca, said. “And this is just one more round.”
The price of Venezuelan oil dropped below $22 on Friday, its lowest level in more than a decade. Speaking in a televised address before the vote, Maduro warned that current price levels are unsustainable. Venezuela has the world’s largest proved reserves of oil and in 2014 was the fourth-largest exporter to the U.S. behind Canada, Saudi Arabia and Mexico.
“How many countries or businesses can bear these prices?” he asked. “Almost no one.”
The International Monetary Fund estimates that inflation in Venezuela, which already stands as the world’s highest, will spiral to 720 percent this year. The economy is expected to contract for the third consecutive year.
Growing discontent over soaring prices and empty store shelves fueled the opposition’s landslide victory in congressional elections last month. Maduro insists that Venezuela’s economic hard times are the result a campaign waged by his political opponents and the U.S. to destabilize the country. His critics, counter it’s the government’s incompetence and and nearly two decades worth of socialist controls.
Venezuela’s $4 billion of bonds due in 2027 on Wednesday fell to the lowest since they were first sold in 1997, before climbing 1.55 cents on the dollar to close at 34.75 on Friday. Credit-default swap traders are pricing in a better than 80 percent chance the country misses a payment in the next 12 months.
“Inflation is a very serious issue and we reject this decree because it’s more of the same,” said Guerra, who sits on the National Assembly’s finance committee.
Neither side showed any signs of backing down Friday with the government and opposition spending the day accusing one another for the current crisis.
“I regret that the majority that controls Congress has turned its back on the country,” Maduro said. “It prefers the path of sterile confrontation.” Maduro has ruled by decree for most his presidency beginning in 2013, while his mentor and predecessor, Hugo Chavez, did so on four occasions during which he passed over 200 laws.
Despite its latest setback, the government insists that it’s open to compromise to remedy the country’s woes. “We are not opposed to debating or hearing suggestions and opinions, and that should be made completely clear,” Luis Salas, the newly appointed vice president of the economy told Venezuelan daily El Mundo on Friday.
Yet after long-promising to overhaul the country’s economy, many remain skeptical of the governments effort to extend an olive branch.
“There’s a divorce between what the government says and what it does,” says Oliveros, the economist. “Until that’s resolved, there’s no credibility.”