CARACAS, Venezuela – Even by Venezuela’s volatile standards, it’s been a difficult few days.
Basic staples such as flour and vegetable oil have grown scarce throughout the country, the currency is plunging in a thriving black market and inflation that’s already among the highest in the world is accelerating.
Amid so much unease, President Nicolas Maduro has settled on radical, and some say self-defeating, solutions. In recent days, he’s ordered the military to take over appliance stores, which he’s told to slash prices, leading bargain hunters to form block-long lines across the country.
The populist measures seem designed to help Maduro’s party get over the hump of next month’s mayoral vote, its first electoral test since the president narrowly defeated opposition leader Henrique Capriles in April. But while the measures apparently are popular with voters, Maduro runs the risk of cannibalizing an already damaged economy.
Some analysts are now asking whether the late President Hugo Chavez’s socialist revolution has reached a point of no return, where what little private investment is left vanishes completely and Maduro has no choice but to fully embrace a statist model.
“It’s a very high-risk strategy,” said sociologist David Smilde, who has spent part of the past two decades teaching in Venezuela and is now a senior fellow at the U.S. think tank the Washington Office on Latin America. “If this week, it’s electronic stores, then the automotive sector, and you keep doing this for the four weeks until elections, you could do some real damage to the economy.”
It’s hard to overstate the grim predicament the government and country face.
Although Venezuela claims the world’s biggest proven oil reserves, the nation of 30 million is suffering shortages of everything from electricity to auto parts to medical equipment.
Nearly 73 percent of Venezuelans say they’re pessimistic about their country’s prospects, 20 points more than when Maduro was elected by a razor-thin margin that the opposition still disputes, according to a poll taken last month by the Venezuelan firm Datanalisis that was reported by local media. Another 67 percent see the country’s political situation as unstable.
Maduro has responded by appearing daily on TV to announce the confiscation of businesses he accuses of helping wage an “economic war” on Venezuela. Congress is expected to approve a bill as early as this week granting him special decree powers, which would give him authority to expand the crackdown.
Just recently, Maduro had been trying to woo investment.
The government eased investment rules for the oil industry, the source of 95 percent of export revenue, and rolled out the red carpet for a new factory by Swiss food giant Nestle. Even while avoiding a politically costly devaluation of the country’s fixed-rate currency, Maduro’s government has supplied more dollars to local producers.
Now, analysts say, Maduro is scuttling that attempt at moderation, with the risk that confiscations and price controls will prompt companies in more critical areas such as food and pharmaceuticals to freeze production.
As a result of the emergency measures taken last week, the U.S. dollar shot up past 60 bolivars on the black market, 10 times its official rate, while yields on the nation’s bonds jumped to a near two-year high.
“We know that if we don’t buy now there will be nothing left around Christmas,” said Mariza Bermejo, a 21-year-old housewife who had been standing in line for more than 24 hours outside a JVG appliance store in eastern Caracas to buy a refrigerator at a deep discount.