Venezuela’s Revolution

By | Updated Nov 16, 2016 11:32 PM UTC

Venezuela has more oil than Saudi Arabia and more poverty than Brazil. Its previous leader, the left-wing Hugo Chavez, sought to use the country’s reserves to light a revolutionary path to prosperity for Latin America’s poor. Under his protege and successor, Nicolas Maduro, Venezuela can’t even keep the power on consistently. Faced with reduced oil prices, the country, once one of Latin America’s richest, is plagued with shortages of everything from toilet paper to antibiotics to food. And that’s on top of a triple-digit rate of inflation, widespread violent crime and corruption allegations. The Chavismo legacy is at risk as opposition lawmakers clamor to bring Maduro down. He’s holding on tightly to power, at a high cost to Venezuela’s democratic institutions. 

The Situation

Vatican-brokered talks between the government and the opposition produced a commitment by both sides in November to resolve their differences within a "constitutional and electoral framework." That left considerable room for further conflict, given the enmity between the two. For most of 2016, Maduro has been 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. The discord worsened in October, when the opposition's efforts to force a recall vote on Maduro were suspended by the national electoral council. Polls suggest he would lose such a test. The suspension was widely condemned, at home and abroad, as a breach of democratic protocol, including by the Organization of American States. Earlier, the National Assembly voted to hold a trial of Maduro, who had said it was a question of time before the legislature “disappears.” The opposition’s electoral victory was fueled by widespread discontent with the economy, which shrank 5.7 percent in 2015. 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. In June, shortages prompted the first major food riots in decades. Signs of hyperinflation are appearing; the International Monetary Fund predicts that prices will surge more than 700 percent in 2016 from 122 percent last year. With the country’s largest bank note worth about 6 U.S. cents, some stores have taken to weighing bills instead of counting them. 

Why Venezuela's Many Crises Keep Getting Worse

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 has pushed millions back into poverty, and a homicide rate second only to Honduras

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 more than 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 2015 election disapproved of Maduro’s performance, but in a poll, 57 percent of respondents said they still hold Chavez in high regard. Analysts increasingly question whether Venezuela can and should continue to service its foreign debt, on which it owes almost $90 billion over the next ten years.

The Reference Shelf

  • A Council of Foreign Relations backgrounder.
  • A report on Venezuela's recent travails from the Congressional Research Service.
  • “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.”
  • Opposition scholars blog about Venezuela’s problems at Caracas Chronicles.
  • Harvard University economist Ricardo Hausmann writes on the Venezuelan government’s plan to prosecute him.

(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