by Kathleen Castner
A look at the highs and lows of the Venezuelan government from the 1970s up until the current day crisis.
Situated on the Caribbean Sea, Venezuela, a country in South America, seems an idyllic vacation spot. Prior to the turn of the century, Venezuela maintained political stability and prospered with the implementation of democratic elections. However, a cursory search reveals the corruption that characterizes the current administration. Simultaneously, it is undergoing a severe economic crisis. Venezuelan is a petrostate, as its economy relies on the exportation of oil and oil prices globally. Venezuela’s dependence on this so-called “black gold” has made it vulnerable to low oil prices, which has caused the current situation. The current leader, Nicolás Maduro, has historically been unable to fund the social programs in Venezuela; his main folly printing money and instituting price controls to support them. Also, the lack of foreign exchange has decimated domestic production and has made goods scarce. Now, Venezuela is ridden with poverty as people try to grapple with these harsh conditions. Basically, as oil prices dropped, so did political tranquility and conditions in Venezuela. To track their path, Venezuela’s history must be further examined.
1970s
In the 1970s, Venezuela was home to a booming economy; it had the highest growing population rate and lowest inequality rates in Latin America. The success was attributed to the Arab Oil Embargo in 1973. A coalition of Arab states, many of whom exported oil, was in the midst of a war with Israel when they passed this embargo in order to retaliate against countries that supported Israel. Oil prices surged, which benefited Venezuela—a prominent exporter of petroleum. This was called the “first oil shock.” The president at the time, Rafael Caldera, reinvested the profit in welfare programs. Shortly after, in 1974, Carlos Andrés Pérez became president and nationalized the oil and gas industry in 1976 [2]. While he did send financial aid to other Central American countries, he neglected his citizens. It was estimated that the lowest 1/5th of the Venezuelan population received only 3% of the national income despite the fact that Venezuela had one of the highest per capita incomes at the time [3]. The unemployment rate was high and poor working conditions were only exacerbated. A “second oil shock” ensued in 1979 during the Iranian Revolution, which led to petroleum price increasing once again.
1980s
The early 1980s were relatively optimistic for the Venezuelan economy as its GDP continued to climb. In 1989, Venezuela’s luck ran out. Oil prices significantly dropped due to a surplus of oil. President Pérez’s government, who was just reelected, suddenly owed $33 billion in foreign debt. He was forced to accept a $4 billion loan from the International Monetary Fund (IMF) to mitigate the country’s debt [4]. Moreover, he imposed an austerity program to alleviate the debt. The price of consumer goods, the ticket price of public transportation inflated, and constitutional rights were no longer guaranteed. This prompted violent protests and thousands of dissenters being arrested.
1990s
In 1992, Hugo Chávez, a socialist lieutenant colonel, led a coup to overthrow the government of Pres. Carlos Andrés Pérez. The rebellion failed, and Chávez went on national television urging other citizens to stop fighting. Though, Venezuelan citizens, frustrated with their current political leadership, felt moved by Chávez’s nationalistic ideals and supported him. Chávez was arrested in 1994, though the president at the time, Rafael Caldera, who had been elected for a second term, dropped the charges. Chávez ran for president in the 1998 election and by appealing to the lower class, he ended up winning with 56% of the vote [1]. Chávez had international support as well. Many celebrities, such as Naomi Campbell, and US politicians, such as Bernie Sanders, praised Chávez. Campbell even called Chávez a “rebel angel.” They praised his social programs, such as free health care.
Economically, Venezuela went through a whirlwind in the 1990s. After the late 1980 riots, Pérez instituted drastic economic policies to stimulate the failing economy. The most infamous was his austerity program that was in conjunction with an agreement with the International Monetary Fund (IMF). The IMF gave Venezuela $453 million immediately and another $4.3 billion over the next three years. As expected, prices increased dramatically which sparked civil unrest. Under the second Caldera administration (1994-1999), international oil prices crashed once again and per capita GDP dropped to the lowest since 1963. Caldera attempted to lessen the deficit by imposing austerity measures that cut federal spending by 10% [5]. Additionally, the second-largest bank failed and the government had to take it over. Because of these circumstances, Venezuela experienced severe inflation rates, and its sovereign debt increased. Chávez inherited an economy in shambles.
2000s
The turn of the century witnessed President Chávez advocate to end government corruption, invest in social programs, and redistribute the country’s oil wealth. Chávez’s election also had an influence on other Latin American countries. A wave of socialist government was voted in during the 2000s, dubbed the “pink tide.” Similar to Chávez, their bloated welfare programs were funded by high commodity prices of exports such as oil, copper, and beef.
In Venezuela, Chávez drafted a new constitution that gave the president control over all three branches of government and imposed new election requirements nationwide. In essence, his crusade against corruption was ineffective and, possibly, a facade. Chávez discontinued foreign relations with the United States but was emphatic about reestablishing a relationship with Cuba, a communist country. These radical actions were the impetus for anti-Chávez protests. Additionally, it prompted a 2002 military coup that captured Chávez. However, his presidency was reinstated only three days later. In 2006, Chávez was reelected for a third, 6-year term. He spoke out against President George W. Bush. In 2009, he supported constitutional amendments abolishing term limits for his position, thus allowing for him to be reelected repeatedly. Once these were passed in a public referendum, he announced government programs that ostracized rebellious citizens and shut down radio stations that criticized Chávez’s government. Furthermore, Chávez blocked international organizations that oversee human rights practices from visiting Venezuela. The country also withdrew from the American Convention on Human Rights, an international human rights agreement.
Chávez wanted to diversify the economy. However, he neglected to spend money maintaining Venezuela’s oil factories. Simultaneously, he subsidized oil exports to other countries, such as Cuba. Additionally, he also fired almost 20,000 oil employees when they went on strike in 2002. The culmination was a significant increase in foreign debt [5]. Chávez disrupted the private sector by taking over private companies, such as farm businesses. This was detrimental when oil prices eventually collapsed and accounted for the future food shortages. Chávez mismanaged the flow of goods in the Venezuelan economy. There were more imports than exports since he neglected the oil industry. Also, Chávez was trying to pay off debts. This created a capital flight situation. The government was unable to tax anything which meant no funding for its cumbersome social welfare programs. However, global oil prices remained high which benefited Venezuela’s volatile economy.
2010s
In 2012, Chávez traveled to Cuba for cancer surgery. He appointed his vice president, Nicolás Maduro, to act as the country’s interim leader, but Chávez would pass away a couple of months later. Moreover, Maduro won a special election to take over the rest of Chávez’s term. In mid-2014, global oil prices tumbled and so did Venezuela’s economy. This was because traditionally non-oil-producing countries, like the United States, began drilling for oil. Thus, leading to an excess in supply, and Venezuela was forced to default on its debt.
In 2017, he got Venezuela’s Supreme Court to usurp power from the National Assembly, the unicameral legislative branch of Venezuela. This increased Maduro’s power. The oppressiveness of Maduro’s regime is apparent in a situation concerning Venezuela’s former attorney general, Luisa Ortega. After citing human rights abuses committed by the regime, she was forced to flee to Columbia [1]. Furthermore, the economy was crashing which led to massive food and medicine shortages. Protestors petitioned for policies that would end Maduro’s socialist government. In response, Maduro insisted on incarcerating opposition leaders and banning them from running for public office.
He was successful doing the latter and in 2018, he was re-elected for another six-year term. The illegitimacy was questioned worldwide, though Maduro still was granted the presidency [3].
Oil income tremendously declined in Venezuela. The autocratic government printed more money which led to inflation of 80,000% [8]. Meanwhile, in 2019, many nations refused to accept the results of the 2018 election. The National Assembly, the last remaining democratic body in Venezuela, elected John Guaidó, an independent and Speaker of the National Assembly, to become the country’s leader. They stated this was legal since Maduro was elected illegitimately. In order to stifle Maduro’s government, the United States imposed a sanction on the oil industry which stopped the proceeds from U.S. oil sales to end up in Maduro’s control [12]. However, economists agree that Venezuela is overwhelmingly responsible for its domestic crisis; the collapse began before the sanctions, and its effects were minimal.
In 2018, the situation turned violent. There was an assassination attempt on Maduro with a drone. Furthermore, Guaidó’s effort to have humanitarian aid delivered was blocked when Maduro shut down the borders.
2020-Current
The situation in Venezuela is now dubbed a full-fledged humanitarian crisis. More than 3 million have escaped the devastating situation [5]. Economists predict that Venezuela’s refugee crisis will soon eclipse Syria’s refugee crisis, which stands at 5.5 million [10]. 1.8 million Venezuelan refugees have seeked refuge in nearby Columbia which has left its borders relatively open. The Columbia government is also allowing Venezuelas to take advantage of their universal healthcare and educational system. Approximately 351,000 Venezuelas have entered the United States, though many are deterred by the long journey. Lastly, 500,000 Venezuelans have sought asylum in Peru. Originally, Peru’s lenient policies allowed Venezuelans to obtain work permits for one year. Though, Peru couldn’t keep up with this mass influx of refugees, so now they require passports and visas to enter [11].
Maduro and Guaidó are both technically leading the country. The problem lies in which one other countries view as the legitimate president. For instance, China and Russia, support Maduro, while the United States and nearby Brazil support Guaidó. Guaidó argued that Maduro’s re-election was illegitimate. Therefore, the Constitution allows him to fill in as an interim president.
In 2017, the Venezuelan Supreme Court, controlled by Maduro, stripped the National Assembly, the last democratic body in the nation, of its powers. This prompted the opposition to call for a coup. Recently, Maduro has made it a priority to regain control of the National Assembly. There was an election in December 2020 for this legislative body. Many opposition leaders boycotted this, stating the polls cannot be trusted. Because of this, Maduro’s party won 256 out of the 277 seats [13].
In addition, Venezuela is still experiencing mass starvation and limited medicine. The Maduro regime did create the CLAP program to alleviate this, where a household receives a small box of food at a subsidized rate. However, if a district did not vote for him, they would not receive any rations. In essence, the program is corrupted [14].
Currently, Venezuela is experiencing severe inflation. This is due to the fact that the government continues to print money in order to fund its social programs. Moreover, there are no companies or wealthy individuals left to tax. In December 2020, national consumer prices rose 77.5% from November 2020, which was the highest number in 22 months. This was due to generous Christmas bonus payments to citizens that weakened Venezuelan currency. Economists predict that inflation rates at the end of 2021 will be approximately 1,453%. Though, this is dependent on whether the Biden administration will relax U.S. sanctions on Venezuela [15].
Others are forced to contend with brutal policing practices, human rights violations, and poor prison conditions. These conditions have just been exacerbated by the pandemic as the country deals with a failing healthcare system.
Despite the earlier pink tide, Venezuela's economic and humanitarian disaster sparked a Latin American conservative wave. Specifically, many of these presidents aimed to promote market policies. Argentina voted in the pro-business Macri, but other countries have chosen leaders that are further right. Buoyed by evangelicals, Brazil elected Jair Bolsonaro, a vocal Trump supporter.
Sources
1. Cheatham, A., & Cara, R. (2021, January 22). Venezuela: The Rise and Fall of a Petrostate. Council on Foreign Relations. https://www.cfr.org/backgrounder/venezuela-crisis
2. Forero, J., & Luhnow D. (2019, February 7). Paradise Lost: Venezuela’s Path from Riches to Ruin. The Wall Street Journal. https://www.wsj.com/articles/paradise-lost-venezuelas-path-from-riches-to-ruin-11549570900
3. Hanke, S. (2019, January 1). Venezuela's Hyperinflation Hits 80,000% Per Year in 2018. Forbes. https://www.forbes.com/sites/stevehanke/2019/01/01/venezuelas-hyperinflation-hits-80000-per-year-in-2018/?sh=759184b04572
4. Kiger, P. (2019, May 9). How Venezuela Fell From the Richest Country in South America into Crisis. History.com. https://www.history.com/news/venezuela-Chávez-maduro-crisis
5. Millard, P., Hoffman, C., Gertz, M., Lin, J. (2019, February 16). A Timeline of Venezuela’s Economic Rise and Fall. Bloomberg. https://www.bloomberg.com/graphics/2019-venezuela-key-events/
6. Nelson, B. (2021, March 1). Hugo Chávez. Britannica. https://www.britannica.com/biography/Hugo-Chávez
7. Randall, S. (n.d.). The 1970s Arab-OPEC Oil Embargo and Latin America. Latin America Research Center. https://networks.h-net.org/system/files/contributed-files/henergy-s-randall-latin-america-and-1973-oil-crisis.pdf
8. Stott, M. (2019). The failure of Juan Guaidó to dislodge Nicolás Maduro from power has accelerated the economic implosion [Photograph]. Financial Times. https://www.ft.com/content/396650ba-b2e4-11e9-bec9-fdcab53d6959
9. The Economist Data Team. (2016). In graphics: a political and economic guide to Venezuela [Photograph]. The Economist. https://www.economist.com/graphic-detail/2016/02/18/venezuela-a-nation-in-a-state
10. Chandran, V. (2018, Feb 9). Venezuelan refugee crisis could eclipse Syria’s, economist predicts. CNBC. https://www.cnbc.com/2018/02/19/venezuela-refugee-crisis-could-be-worse-than-syria-economist.html
11. Wolfe, G. (2020). Where Are Venezuelan Migrants and Refugees Going? An Analysis of Legal and Social Contexts in Receiving Countries. Center for Migration Studies. https://cmsny.org/publications/venezuelan-migrants-legal-contexts-wolfe-010421/
12. Oliveros, L. (2020, October). The Impact of Financial and Oil Sanctions on the Venezuelan Economy. WOLA. https://www.wola.org/wp-content/uploads/2020/10/Oliveros-report-summary-ENG.pdf
13. Venezuela crisis: Maduro loyalists take control of parliament. (2021, January 5). BBC News. https://www.bbc.com/news/world-latin-america-55545352
14. Venezuela crisis: Vast corruption network in food programme, US says. (2019, July 26). BBC News. https://www.bbc.com/news/world-latin-america-49125575
15. Vogado, S. (2021, February 12). Venezuela: Inflation eases from December's 22-month high in January. Focus Economics. https://www.focus-economics.com/countries/venezuela/news/inflation/inflation-eases-from-decembers-22-month-high-in-january#:~:text=FocusEconomics%20Consensus%20Forecast%20panelists%20forecast,falling%20to%20589%25%20in%202022.