Opinion Piece

A call for change: Venezuela dangerously close to chaos

Bnamericas Published: Thursday, May 19, 2016

Although events often appear worse from a distance than they actually are, watching Venezuela unravel from Chile I get the sense that the state of affairs is every bit as dire as that portrayed by the brave journalists relaying news out of the country daily. Hospitals lack medicine, lines for basic goods are eternal, riots and looting are constant, there is so little water and electricity that public employees only work a few days a week, and violence and armed gangs are rampant – indeed, if there is anything at all in abundance in the country it seems to be weapons.

The situation appears so combustible it makes what is occurring in Brazil seem downright sleepy.

President Maduro has declared a 60-day state of emergency, giving him authority to sidestep the opposition-controlled National Assembly, an entity he has said will soon "disappear." He blames the US for an "economic war" waged against his country and shows no indication of yielding to calls for a recall referendum that has brought opposition leaders and massive crowds to the streets.

The problem is Maduro has little room to maneuver: the economy in the country with the largest oil reserves on earth is an absolute debacle. Foreign reserves are falling and the nation is on the verge of default. The currency keeps depreciating and is close to worthless. Inflation is out of control, investment has come to a standstill and GDP is expected to shrink 8% in 2016.

Worse still, Venezuela's oil industry – the government's main source of income – is not only suffering from the crash in the price of commodities but also from falling production and fleeing companies. Oil service companies Halliburton (which has been in Venezuela since 1940) and Schlumberger have announced their exit from the country, basically because they aren't getting paid. One oil analyst recently told Bloomberg News he wouldn't be surprised if oil production "got to zero." Given the state of affairs, it's impossible to really know how much oil the country is producing, but it is certainly lower than the 2.3Mb/d state oil company PDVSA claims.

If there is a little room for hope, it's that oil prices are rising slightly and now touching on US$50/b, partly as a result of falling global production from places such as Venezuela. But this is nowhere near the US$100-120/b prices common during the reckless years of Hugo Chávez, years marked by lavish spending on social programs with little thought to the future (the millions of people he temporarily propped up are now on the verge of destitution), and any small spike in oil prices will do little to correct the deep structural mess the country is in.

All of this only to conclude that a new direction is needed in Venezuela, that the world needs to pay attention, and that change must come without violence. Allowing the recall referendum would be a good start.

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