THE POLITICAL drama in Venezuela, where a populist, authoritarian government is attempting to cling to power despite losing a legislative election by a landslide,
tends to obscure a deeper crisis. Though it is awash in oil, the
country of 30 million people is facing an economic collapse and a
humanitarian disaster.
Venezuela already suffers from the world’s highest inflation rate — expected to rise from 275 percent to 720 percent this year
— one of its higher murder rates and pervasive shortages of consumer
goods, ranging from car parts to toilet paper. Power outages and the
lack of raw materials are forcing surviving factories and shops to close
or limit opening hours. According to a local survey cited by the Economist, the poverty rate is 76 percent, compared with 55 percent when Hugo Chávez, the late founder of the regime, took power in 1999.
Worst
of all, the country is running desperately short of food and medicine.
Venezuelans spend much of their time waiting in lines outside stores,
but increasingly the shelves are bare. The head of the nation’s pharmaceutical association recently appealed to the World Health Organization for aid, saying that distribution of 70 percent
of basic medicines was disrupted. The chairman of the largest domestic
food producer has said that if the government does not quickly seek aid
to import food, it “will cause grave harm to ordinary Venezuelans.”
The
math behind these warnings is stark, as economist Ricardo Hausmann
recently outlined in the Financial Times. At current oil prices,
Venezuela will earn less than $18 billion from exports this year, while it owes $10 billion in payments on the $120 billion in debt
it has racked up. That leaves $8 billion for imports, but even after
contracting 20 percent, imports were $37 billion in 2015 — and Venezuela
now imports most of its food. Even with a debt default that the markets
expect, it’s hard to see where additional hard currency will come from:
The country broke relations with the International Monetary Fund almost
a decade ago, has no ability to obtain private loans and has nearly
exhausted its liquid reserves. It already owes China, its latest
benefactor, $50 billion.
Facing
this calamity, the government of President Nicolás Maduro appears
paralyzed. Mr. Maduro and one of his ministers have spoken of taking
desperately needed common-sense measures, such as raising the price of state-retailed gasoline, now below 1 cent per gallon, and altering a currency exchange system under which the U.S. dollar is worth 150 times more on the black market
than it is at the official rate. Day after day, however, the government
does not act; in a Facebook post Wednesday, Mr. Maduro hinted at
disputes among his ministers, one of whom argues that inflation does not
exist.
Leaders of the opposition’s new parliamentary
majority, who are locked in a public power struggle with the regime, are
said to be negotiating with it behind the scenes. A pact between the
two sides on emergency measures, coupled with an appeal to the IMF, is
Venezuela’s best chance of rescue. Sadly, it doesn’t look likely — which
is why its neighbors, and the United States, should be preparing for an
implosion. Washington Post
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