Venezuela’s Revolution

By | Updated July 24, 2017 5:43 PM UTC

Venezuela has more oil than Saudi Arabia and more poverty than Brazil. Its previous leader, the late Hugo Chavez, sought to use the country’s reserves to light a leftist path to prosperity for Latin America’s poor. Under his protege and successor, Nicolas Maduro, Venezuela hasn’t always been able to keep the power on. 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 and food. And that’s on top of triple-digit inflation, widespread violent crime and corruption allegations. Opposition lawmakers sought to challenge the Chavismo legacy and bring Maduro down when they gained control of the National Assembly in late 2015 elections, but Maduro has held tightly to power — at a high cost to Venezuela’s democratic institutions. 

The Situation

Maduro continues to crack down on dissent while consolidating power, having been emboldened after a year of opposition efforts to thwart him largely failed. His latest move is a call for a constituent assembly to consider changes to Venezuela's constitution, which brought a U.S. warning of "strong and swift economic actions." While Maduro says the goal is to give the justice system new tools to fight corruption, terrorism and treason, opponents say he wants to move further toward a Cuba-style authoritarian regime. Venezuela, meanwhile, keeps stepping back from the brink of disaster. The Maduro-backed Supreme Court in April seized the opposition-run Congress, then reversed itself days later, following widespread protests. The government also reassured nervous bondholders in April by making $2.2 billion in payments due on debt incurred by the state-owned oil company. In a move seen as reinforcing the more radical side of the ruling socialist party, Maduro in January named longtime party operative Tareck El Aissami as his new vice president and gave him widespread powers. Six weeks later, the U.S. designated El Aissami as a drug kingpin, making him one of the most senior government leaders of any country ever to be sanctioned this way. The economy continues to collapse. Gross domestic product plummeted a staggering 10 percent in 2016, according to the International Monetary Fund. Revenue from oil, which accounts for 95 percent of foreign-currency earnings, has tumbled along with oil prices. With the country short on cash for imports, citizens wait in long lines to find scarce household items. Signs of hyperinflation are appearing; the IMF estimated that prices surged almost 500 percent in 2016. With the country’s currency becoming increasingly worthless, 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, ranging from Marxist to center right, and that it has yet to present a concrete plan for the country's future. After drawing 7.5 million supporters in an unofficial July referendum to reject Maduro's plan to change the constitution, however, the opposition appeared to be gaining momentum. The opposition doesn't necessarily have a mandate to unwind the Chavismo revolution, though. 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 10 years.

The Reference Shelf

  • A Bloomberg QuickTake Q&A on Maduro's call for a constituent assembly to amend the constitution, and another on the likely effects of a ban on oil imports from Venezuela to the U.S.
  • A Council of Foreign Relations backgrounder.
  • A New Yorker article describes Venezuela as a failing state.
  • 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.

First published Jan. 29, 2015

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

To contact the editor responsible for this QuickTake:
Paula Dwyer at pdwyer11@bloomberg.net