Venezuela's Collapse Looks More Like Economic Suicide

Jan 29, 2015

Venezuelan President Nicolas Maduro
Credit chavezcandanga/Flickr

Venezuelan President Nicolás Maduro has warned us all this week that “a hell of solitude awaits anyone who betrays” his nation’s socialist revolution.

Duly noted, Señor Presidente! But we also can’t help noting that nobody’s in a lonelier hell right now than Nicolás Maduro.

His approval rating is lower than Miss Venezuela’s neckline, poised to drop below 20 percent. The price of his country's oil, which might as well be Venezuela’s only export these days, sits even lower: less than $40 per barrel, down from more than $100 in June. The International Monetary Fund says his economy will shrink seven percent this year. That’s depression territory.

And, oh yeah, the security chief for Maduro’s mentor and predecessor, the late President Hugo Chávez, just defected to the U.S. He's expected to testify that socialist leaders like the head of Venezuela’s National Assembly run the country’s most powerful drug-trafficking operation, according to El Nuevo Herald.

RELATED: Venezuela's Truly Indictable Offense? President Maduro's Governance

In a speech to that legislature last week, Maduro could have announced any number of urgent policy shifts that might keep the western hemisphere’s most oil-rich country from crashing like a wayward riverboat hurtling over Angel Falls. Anything. A currency devaluation. Some social spending cuts. Dropping the sophomoric idea that you can control prices in supermarkets and electronics stores.

But Maduro is the blind ideologue at the helm of that boat. So he refused yet again to call for necessary changes. Instead he kept blaming the world outside Planet Nicolás for its “international conspiracy” against him.

Which means, at this point, that we’re looking at something scarier than just the dogmatic incompetence Maduro is famous for.

This is starting to feel like an economic death wish. As if he prefers to steer over the falls rather than concede one iota of his Marxist malarkey.

At this point we're looking at something scarier than just the dogmatic incompetence Maduro is famous for. This is starting to feel like an economic death wish.

Now, before we condemn Maduro, remember that even those of us on Planet Earth are capable of economic suicide. In fact, think back a decade.

In 2006, oil and gasoline prices were at historic highs. One of the guys Americans held responsible was the left-wing yanqui-basher down in Venezuela, Hugo Chávez.

But Chávez wasn’t culpable for the $100 tank fill-ups. We were. We and our own dogmatic, SUV-obsessed driving culture. “The blame for high oil prices lies in the consumer model of the U.S.,” Chávez told me in an interview that year. “Its reckless oil consumption is a form of suicide.”

And he was right.

To its credit, and thanks in part to the Great Recession, the U.S. put a brake on buying Hummers and started making cars that didn’t suck fuel like frat boys swilling beer. We also started pumping more of our own fracking oil. And voilà! Today I filled up my Camry for 35 bucks.

The economic suicide watch, it turns out, should have been focused on Venezuela.

During that gilded oil age a decade ago, Hugo and the Chavistas could have used the booty to diversify Venezuela’s recklessly petro-dependent portfolio. They could have actually started making an economy instead of just pumping one, as Venezuelan leaders have been doing for a century now.

FINANCIAL HOLE

But oil today accounts for a surreal 96 percent of Venezuela’s export revenues, while at the same time profligate government subsidies keep the price of domestic gasoline at a nickel a gallon.

And voilà! The country’s dollar reserves are in a nose-dive and so is the real value of the Venezuelan currency, the bolívar. The inflation rate, meanwhile, is skyrocketing: 64 percent, the highest in Latin America. Basic goods from rice to soap keep getting scarcer while lines outside grocery stores keep getting longer.

Wall Street, meanwhile, has all but confirmed that Venezuela will default on its foreign debt this year or next – it needs oil prices to be at least $100 per barrel to meet its obligations – which will only deepen the country’s financial hole.

Adding to the economic catastrophe will be brewing political unrest. Last weekend Venezuela’s opposition kicked off a new round of anti-government street marches. And the speeches of opposition leader Henrique Capriles – who is considered the more patient of Maduro’s foes – are sounding decidedly impatient.

But more ominous for the Chavistas are signs that the poor, the folks who always get cold-cocked the hardest by hyperinflation and product shortages, are reaching their own breaking point.

If Maduro and other Chavista honchos sense they’re losing that reliable base – during a parliamentary election year, and a year before Maduro could be subject to a recall referendum – the copper fist they used against protesters last year could turn a more brutal iron.

In the end that might be political suicide. But when leaders like Maduro find themselves in a hell of solitude, they’re capable of committing it.

Tim Padgett is WLRN's Americas editor. You can read more of his coverage here.