Girish Gupta

HOME

PHOTOS

VENEZUELA ECON

ONLINE

Twitter
Instagram
Facebook
LinkedIn
AngelList
Keybase
GitHub
IFTTT

BY COUNTRY

Afghanistan
Brazil
Colombia
Cuba
Ecuador
Egypt
Guyana
Iraq
Jordan
Lebanon
Mexico
United Kingdom
Venezuela

BY MEDIUM

Text
Photo
Radio
TV/Video

BY PUBLISHER

Al Jazeera
BBC
BuzzFeed
CBC
Christian Science Monitor
CNN
Daily Mail
Data Driven Journalism (EJC)
Datum
Ecologist
Economist Intelligence Unit
Emerging Markets
Financial Times
Foreign Policy
France 24
Fusion
GlobalPost
Guardian
Independent
La Prensa (Panama)
LatinFinance
Mancunion
Monocle
National (Abu Dhabi)
New Internationalist
New Statesman
New York Times
New Yorker
NPR
PBS
PRI
Radio France Internationale
Reuters
RTE
Sky News
Sun
Sunday Times
Telegraph
TIME
Times of London
USA Today
Vice
WLRN

ABOUT

About
CV
Contact (PGP Key)


The Cost of Cheap Gas: A Big Loser
Jan. 22, 2015 — Caracas, Venezuela

Text published by TIME [PDF]
Audio featured on RTÉ World Report



Venezuela’s economy is in tatters. Annual inflation is running at more than 60%. On the black market, the local currency has lost 65% of its value against the U.S. dollar in the last year. Foreign reserves have fallen around 30% in the last two years. Shortages, due in large part to importers’ struggle to obtain hard currency, have led to ubiquitous lines for everyday goods. “This government is filth,” said Antonia Rodríguez, a 60-year-old lab assistant, waiting in line for milk outside a Caracas supermarket on a recent Sunday morning. “There’s no food! If Chávez were alive, this wouldn’t be happening.”

Former president Hugo Chávez lubricated his socialist revolution with hard cash from Venezuela’s oil reserves, the world’s largest. Some 96% of the country’s foreign income is derived from selling oil. But Chávez is dead, and his successor Nicolas Maduro—elected in April 2013— is paying the bill. The price of Venezuela’s oil, composed of heavier crudes that fetch less than international benchmarks, last week averaged just over $39 a barrel. Economists estimate that Venezuela needs well over $100 a barrel to maintain its bloated spending. Arguably no country other than Venezuela—which may well default on its debt this year—loses so big from cheap oil.

Last year, Maduro faced the biggest antigovernment protests in Venezuela in more than a decade. Now, with oil revenues in free fall, Maduro’s popularity is down to 22% and looks to be falling. Even those who once supported Chávez, like Rodriguez, are unhappy with Maduro’s handling of the economy. Two-time presidential candidate Henrique Capriles, a stalwart of the opposition, has called for further protests. Lacking Chávez’s charisma— which carried the former President through trying economic times in the past—Maduro may be vulnerable to rivals within his Socialist Party. The one saving grace for the government is that the opposition remains divided and weak.

Cheap oil puts the President, who blames the problems on an “economic war” being waged against Venezuela by the West, in a tough position. Bringing in pragmatic economic policies would hurt poor Venezuelans, who form the base of his support. Currency controls, enacted over a decade ago by Chávez, have created a black market on which the dollar sells for 30 times its strongest official value. But devaluing or ending the currency controls would exacerbate inflation and lower the value of Venezuelans’ savings.

Another option would be to end a $12 billion-a-year subsidy on gas at the pump, which allows Venezuelans to fill up their cars for just a few cents. Economically, this would be easier to do now with low oil prices, though politically, it could spark major riots—just as it did when a similar move was tried in 1989.

The oil crash has already clipped Venezuela’s anti-U.S. foreign policy. Beginning under Chávez, Venezuela has served as Cuba’s chief patron, sending the Communist island country almost 100,000 barrels of oil per day and between $5 billion and $15 billion per year in aid. But there’s no way that Maduro can afford to remain so generous with oil below $50 a barrel—something Cuban President Raúl Castro surely knows. The lack of guaranteed support from Caracas would have made Castro “much more eager to negotiate and given the U.S. leverage,” says Ted Henken, a Cuba expert at Baruch College. Last month’s historic rapprochement between Havana and Washington might never have happened in a world of triple-digit oil.

In Venezuela, Maduro has promised that 2015 would be a year of “great economic transformation.” But more recently he’s spoken of the need to “deepen the model” of socialism. When Chávez became President in 1999, he toured the nations of OPE C and invited their heads of state to Caracas for a major summit. Prices went up and stayed there for years, thanks in part to the Sept. 11 attacks and wars in Afghanistan and Iraq. Maduro has just come back from a similar tour of OPE C nations, hoping to persuade cartel members to push up prices and also to seek financing for Venezuela. In a recent cartoon by Venezuelan satirist EDO, Maduro is shown as a sweating snake charmer trying to persuade a barrel of oil to rise. So far, the magic hasn’t worked.


Filed from
Caracas, Venezuela






More...

Advisers urge deep discount in Venezuelan cryptocurrency offering
Jan. 16, 2018


Inflationary math
Dec. 12, 2017


Venezuela money supply up 14 percent in one week, fastest rise on record
Dec. 1, 2017


How a defrocked judge became the chief enforcer for Maduro's Venezuela
Nov. 15, 2017


De cómo un juez destituido se convirtió en el principal artífice judicial del presidente de Venezuela
Nov. 15, 2017


The 'Venezuela Econ' app: Harnessing data to understand a spectacular economic meltdown
Nov. 6, 2017


Venezuela's monthly inflation rises to 34 percent: National Assembly
Sept. 7, 2017


Ousted Venezuelan prosecutor says she fears for her life, will keep fighting
Aug. 10, 2017


Venezuela quells attack on military base, two killed
Aug. 6, 2017


Exclusive: Venezuelan vote data casts doubt on turnout at Sunday poll
Aug. 2, 2017


All eyes on Venezuela military after protests, vote
Aug. 1, 2017


U.S. 'sweetheart' of Venezuela sees worrying signs of authoritarianism
Jul. 29, 2017


Venezuela money supply surges 10 percent in one week, fastest in 25 years
Jul. 29, 2017


Exclusive: At least 123 Venezuelan soldiers detained since protests - documents
Jul. 6, 2017


Venezuela hikes minimum wage 50 percent, effectively down 17 percent
Jul. 2, 2017








© Girish Gupta