Venezuelan President Nicolas Maduro has been working on some “measures.”
“Now that the economic emergency decree has validity, in the next few days I will activate a series of measures I had been working on,” he said Thursday, in a televised statement meant to address a “food emergency” declared by Congress.
The “validity” Maduro references comes from a high court ruling that gives the President expanded powers to tackle a deepening economic crisis that’s left hospitals without medicine and grocery stores bereft of food.
“The controversial move by the Supreme Court, which critics say is packed with supporters of Mr Maduro’s socialist government, potentially sets the scene for a bitter institutional crisis amid claims that the national assembly is being undermined,” FT notes, underscoring the extent to which opposition lawmakers - who in December won 99 of 167 seats that were up for grabs in what amounted to the worst defeat in history for Hugo Chavez’s leftist movement - feel as though last year’s election victory may have been a ruse designed to lend legitimacy to a system that is, and likely always will be, deeply undemocratic.
“This is a tyranny, which has been very successful in disguising as a democracy, and has even allowed itself to lose an election,” Moisés Naím, a former Venezuelan minister and fellow at the Carnegie Endowment for International Peace said.
Thanks to the Supreme Court decision, Maduro doesn’t need the assembly’s permission to intervene further in business, to allocate funds for imports, and to introduce new capital controls. The opposition is furious and says it will speed up efforts to usurp Maduro once and for all. "In the next few days we will have to present a concrete proposal for the departure of that national disgrace that is the government," opposition leader Henry Ramos told reporters on Friday.
"The Supreme Court of Justice has spoken, its word is holy and must be respected by all parts of society and all institutions," Maduro declared.
With inflation set to soar to over 700% this year, Venezuelans are struggling to persist in the world’s worst performing economy. “I hoped to buy toilet paper, rice, pasta,” 74-year-old Rosalba Castellano, told WSJ. “But you can’t find them.”
“The government is putting us through savage suffering,” she laments.
Of course Maduro blames this “savage suffering” on evil capitalists and the US, which he says is waging an economic war on the country.
In reality, mismanagement on an absurd scale including a rash of nationalizations, out of control spending, and price controls have shrunk the private sector and plunged the economy into outright chaos.
“It goes beyond the crime and economic deterioration,” Leonardo Briceno who spoke to WSJ and runs a Caracas public-relations company said. “It’s imagining a scenario where my daughter needs a medication and we can’t find it. That scares me the most.”
(Venezuelans wait in line to buy food in Caracas)
“The crisis is especially acute in what was once a centerpiece for the socialist country, its health-care system,” WSJ goes on to note. “The country’s leading trade group for drugstores says 90% of medicines are scarce,” and preventable deaths are on the rise. Here’s more:
On a recent day at the University Hospital of Maracaibo, in Venezuela’s second-largest city, patients lay on bare beds in rooms with dirty floors. There was no running water, medicine, cleaning supplies or food. Feces floated in the toilets. Medical staffers there said gang members roam the halls, forcing underpaid and harassed doctors to lock themselves in the offices to avoid assaults.
Venezuela used to export rice, coffee and meat. It now imports all three. It even imports its own bank notes, ordered from European firms and flown in on 747 jets.
The number of private companies in the country shrank by 20% between 2006 and 2014, according to Datanalisis. Multinationals such as Clorox Co. have simply left. Others including Ford Motor Co. and Oreo-maker Mondelez have written down the value of their local businesses to zero.
The crisis is felt not just in Venezuela’s teeming cities but in places like Toas, a tiny island of palm trees and crystalline waters in far western Venezuela, home to just 8,000 people.
Last December, thieves stole 15 miles of underwater power cable connecting the island to the mainland. The theft severed the island’s telephone connections and idled its water pumps.
Fisherman Genebraldo Chacin said his children haven’t bathed or gone to school since then, and they have been eating only one meal a day. His neighbors say the island is close to starvation.
“Our food rots without electricity, and it’s sad because it’s so difficult to find food here,” said Mr. Chacin’s neighbor, Sasha Almarza. “When we are able to find any in the store, we eat it all the same day.”
And so on.
As we've documented extensively, Venezuela is staring down an imminent default, despite the fact that the country does in fact try to service its debt. As Barclays noted last month, the country will need to spend 90% of its oil revenue on debt payments assuming $32 crude. Obviously, that's not a tenable proposition.
(note that the headline inflation figure in the right pane is horribly understated)
Thanks to rising imports (as mentioned above) and falling oil sales, the CA deficit has worsened, forcing Caracas to liquidate assets to fund a budget deficit that's projected to hover near 20% of GDP for the foreseeable future.
"Such high inflation has a strong detrimental effect not only on real salaries, but also on income distribution, as the lowest income part of the population tends to have fewer alternatives to protect against inflation," Barclays warns. "This could increase social and political risks, making the current equilibrium increasingly unstable."
Of course there is no "current equilibrium." The opposition was already bound and determined to oust Maduro within six months and now, following the Supreme Court decision to grant him 60 days of emergency economic powers, Ramos says the timeframe for drawing up plans for the President's exit is now "days." Meanwhile, the public may have been unwilling to stage an outright rebellion with inflation at 200%, but at 720% it's difficult to see how things won't careen into outright social upheaval in the not so distant future. Especially once the country defaults and the public comes to realize just how wasteful the government is with what should be a vast store of national oil wealth.
As for what "measures" Maduro is considering to counter the officially declared "food emergency," we'll have to wait and see, but WSJ did give us a hint:
"In response to growing food shortages, Mr. Maduro last month created a Ministry for Urban Farming. He noted that he has 50 chickens in his own home."