Venezuela’s Revolution

By | Updated July 20, 2016 9:12 PM UTC

Venezuela has more oil than Saudi Arabia and more poverty than Brazil. As the only left-wing head of a petrostate, its president has followed the lead of his predecessor and mentor, the late Hugo Chavez, and aimed to light a revolutionary path to prosperity for Latin America’s poor. Subsidized oil and other benefits long bought Venezuela's government influence abroad and popular support at home. But the Chavismo legacy is at risk. Collapsing oil revenue — on top of high inflation, corruption allegations and widespread violent crime — have left Venezuela an economic and social mess. President Nicolas Maduro is locked in a power struggle with opposition lawmakers, who, in December elections, gained control of the National Assembly for the first time in 16 years. Each side is threatening to neutralize the other, pushing the country toward a constitutional crisis.

The Situation

The latest political maneuverings revolve around the Supreme Court. The court, whose 32 justices include 13 that Maduro's government added just after the election, has backed the president against the opposition. It disqualified three elected lawmakers, denying the opposition the two-thirds majority in the National Assembly needed to remove justices and change the constitution. It overruled the assembly's vote to block Maduro from granting himself broad executive powers. In mid-July, the assembly voted to strip the 13 new justices of their power. Opposition leaders were considering swearing in the three disqualified lawmakers and appointing their own judges. A petition drive to force a vote on recalling Maduro, who has three years remaining in his six-year term, has faced challenges from the national electoral council. Alleging his critics were planning a coup, Maduro declared a state of emergency and said it was a question of time before the assembly "disappears." 

The Background

Chavez, a former paratrooper jailed for two years after leading a failed coup in 1992, was elected president in 1998 and revolutionized Venezuelan politics with fiery anti-U.S. rhetoric. He nationalized thousands of companies or their assets, reducing the economy’s capacity to produce anything but oil. He channeled revenue to the poor and expanded Venezuela’s influence in the region by doling out $8 billion a year of cheap oil. He used widespread electoral support to transform a pluralistic democracy into a largely authoritarian system. Unlike Chavez, Maduro has struggled for popularity. Well before oil prices began to fall, he faced high inflation, which is pushing millions back into poverty, and a homicide rate second only to Honduras. Widespread discontent with the economy, which shrank 5.7 percent in 2015, fuelled the opposition's electoral victory. Gross domestic product will contract 10 percent this year, the IMF has predicted. Revenue from oil accounts for 95 percent of foreign currency earnings, and its price tumbled more than three-quarters since 2014 before starting to recover moderately this year. With the country short on cash for imports, citizens wait in long lines to find scarce household items from deodorant to toilet paper. In June, shortages prompted the first major food riots in decades. Signs of hyperinflation are starting to appear, with the International Monetary Fund predicting that prices will surge more than 700 percent in 2016 from 122 percent last year. Economists increasingly question whether Venezuela will be able to pay the $16 billion due this year and next on its foreign debt.

Source: Bloomberg

The Argument

Maduro's critics argue that he's so thoroughly bungled management of the country, it's time for him to leave office. Those who are skeptical of the opposition point out that it's made up of a dozen parties that range from Marxist to center right and that it has no single plan or leader. Nor do the parties necessarily have a mandate to unwind the Chavismo revolution. A majority of those who voted in the election disapproved of Maduro’s performance, but in a poll, 57 percent of respondents said they still hold Chavez in high regard.

The Reference Shelf

  • Harvard University economist Ricardo Hausmann writes on the Venezuelan government’s plan to prosecute him.
  • A Council of Foreign Relations backgrounder.
  • The Americas Society/Council of the Americas website chronicles opposition protests during 2014.
  • “Commandante,” a book by the journalist Rory Carroll, portrays Chavismo as a blend of “the lyricism and strangeness of magical realism with the brutal, ugly truth of authoritarianism.”
  • Moody’s Investors Service explained why it cut Venezuela’s credit rating in January 2015.
  • Opposition scholars blog about Venezuela’s problems at Caracas Chronicles.

(This QuickTake includes a correction of the spelling of Nicolas Maduro's name.) 

First published Jan. 29, 2015

To contact the writer of this QuickTake:
Nathan Crooks in Caracas at ncrooks@bloomberg.net

To contact the editor responsible for this QuickTake:
Lisa Beyer at lbeyer3@bloomberg.net