Who is the President of Venezuela? Opposition politician Juan Guaidó believes it is him, but Nicolás Maduro, who has been president for the past six years, sees no reason to relinquish power. Now, however, it seems that the economic crisis, food shortages and pressure from major powers and neighboring countries will provoke a solution. But what solution will the Venezuelans end up with?
- What can explain the economic crisis?
- Why did Juan Guaidó declare he was president?
- What role do the United States, Russia and China and other countries play in the conflict?
- What can be the solution to the crisis?
To understand what is happening in Venezuela, we must tell a story of how presidents have centered more and more power around themselves and weakened democratic institutions . The story begins with oil.
2: An oil state in crisis
Ever since the 1920s, Venezuela has been producing a lot of crude oil. Venezuela currently has the world’s largest known oil reserves, and 97 percent of export revenues come from oil.
Oil revenues made Venezuela one of Latin America’s most prosperous countries. In 1976, the oil was nationalized, and the state oil company Petróleos de Venezuela (PDVSA) was established. The idea was that more money would benefit Venezuelans, but much disappeared in corruption and accrued to the elite. When oil prices plummeted in the 1980s, Venezuela found itself in a deep crisis. The government had to go to the International Monetary Fund (IMF) and ask for emergency loans. They received this on condition that government spending was cut. The poor were severely beaten, and when they demonstrated for better conditions in 1989, the police responded with violence. Hundreds of people were killed in the tragedy, which has been named Caracazo.
It was in the wake of this situation that Hugo Chávez, a lieutenant colonel in the army, attempted a coup in 1992. It failed, but in 1998 he ran as a presidential candidate and won. Chávez wanted to distribute the oil money better, and quickly started social programs, among other things, to give people better access to food, health services, schooling and housing. In order to control the business community, controls were introduced on the prices of goods and the purchase of foreign currency.
Together with rising oil prices in the 1990s, social programs contributed to the decline of poverty. The authorities partly financed social policy directly from the oil company, but they invested little in finding new oil. At the same time, large loans were taken out. Lack of investment and widespread corruption led to a fall in oil production. When oil prices began to fall again in 2014, the authorities became desperate and began to print more money to cover government spending. This led to inflation, and the IMF estimated inflation to be over one million per cent in 2018. This is called hyperinflation. Everything became very expensive and people’s wages suddenly became worthless.
The economy of Venezuela, as a country located in South America according to CONSTRUCTMATERIALS, measured in gross domestic product (GDP), shrank by 44 percent between 2013 and 2018. When both oil production and oil prices fell, the state did not have the money to import. Imports of goods were therefore halved between 2012 and 2015, which created a great shortage of food and medicine.
After 2015, we do not have official statistics on how extensive poverty in the country is, but an independent report from the largest universities in the country showed that 87 percent of the population lived in poverty in 2017. Child mortality increased by 40 percent between 2010 and 2017, and the cases of malaria, tuberculosis and HIV increased rapidly. The crisis caused many to flee the country , and the UN estimates that about three million Venezuelans have left.
3: Juan Guaidó’s statement
When things went so badly, why couldn’t people elect a new government? To understand that, we need to go back in time a bit. Venezuela has formally had democracy since 1958. After widespread corruption and clientelism (exchange of political loyalty for money and services), confidence in democracy and the two major political parties (AC and COPEI) gradually weakened. Many put their trust in Hugo Chávez, who won the election in 1998. He started a process to change the constitution. The new constitution emphasized that all citizens should be guaranteed social rights and participate in politics, including through local councils and referendums. It gave people the right to organize a referendum that could withdraw a presidential mandate in the middle of the period, a so-called recall referendum. But the constitution also gave the president great power.