Saturday, January 19, 2019

Creation of poverty out of prosperity: the magical realism of Venezuela

Nicolas Maduro started his second term for six years as President of Venezuela on 10 January. But the political drama of his rigged re-election, the economic collapse of the country and the traumatisation of the society resemble the story of “one hundred years of solitude” by the Colombian Nobel prize winner Gabriel Garcia Marquez. The Venezuelan reality is even more bizarre than the magical fiction of Marquez in which the people of Macondo are cursed to suffer one disaster after another. Creation of poverty in Venezuela which was the richest Latin American country in the recent past, is pure Magical Realism.

Venezuela has the largest oil reserves in the world, more than that of Saudi Arabia. Besides oil, the country is blessed with minerals, hydroelectric potential, arable land, pleasant climate, beautiful beaches and many Miss World and Universe titles. In the sixties, the per capita GDP of Venezuela was many times bigger than that of Brazil and Colombia. Caracas was only destination for Concorde flights in Latin America. The Venezuelan middle class people used to go to Miami for shopping during weekend. The country had a vibrant democracy while many countries in Latin America went under military dictatorship during the cold war. 

But today, Latin America has progressed and moved on to the twenty first century with a new paradigm of democratic maturity and economic growth. But Venezuela has gone backwards with a toxic combination of authoritarianism, political chaos, economic disaster, hyperinflation, shortage of food and medicine, rampant crime and corruption.  The Chavistas have given a bad name to socialism which had seen resurgence in the region in the last two decades.

The GDP of Venezuela has contracted consecutively for the last five years to over fifty percent. It is forecast to shrink by another ten percent in 2019. The country has the highest inflation in the world running into six digits. The government has stopped publishing inflation and other economic statistics. Since most of the domestic manufacturing industry and agriculture have been destroyed, the country has become desperately dependent on imports. But there is severe shortage of foreign exchange reserves which are inadequate to cover even essential imports. The Venezuelan currency Bolivar has lost 99.9% of its value and has become worthless. The government keeps changing currencies and exchange rates, which has given rise to huge black market for dollars and goods, run by those with Chavista connections. 

Poor people scavenge for food in the rubbish bins. Soviet-Cuban style queues are common in front of super markets and shops which are often empty and running short of medicines,food and essential items such as toilet paper and soap. There are frequent power cuts and shortage of water. Most international airlines have stopped flights to Venezuela due to payment issues.

Crime and violence is rampant in Caracas which has one of the highest murder rates in the region. The city has become unsafe even for diplomats who need to use bullet proof cars. The happy-go-lucky party-loving people of Caracas have stopped going out in the night.   

According to UNHCR, three million Venezuelans (ten percent of the total population) have fled to other countries to escape the poverty, misery and persecution. This has become the biggest migration and humanitarian crisis in the history of Latin America. This is disgraceful, given the fact that over a million South Americans used to work in Venezuela which offered better prospects than their countries. 

The country’s oil production has come down from 3 million barrels per day to 1.5 mbpd due to mismanagement and lack of investment. PDVSA, the state oil company, which had the best oil experts and managers in the region, is run these days by unprofessional Chavistas. Neither the company nor the government  publish figures of oil exports and revenue which are kept as secrets. A significant part of oil is sent to China as barter payment for the 50 billion dollar plus debt.

The people of Venezuela, subjected to the worst suffering, are seething with frustration and outrage. Chavez himself was a product of such a public anger against the two establishment political parties which plundered the country and got the country into a mess in the nineties. Hugo Chavez asked, “ Venezuela is a rich country. Why are you people poor?”. The masses voted for him overwhelmingly in 1998 and the two traditional parties were completely discredited and decimated. Chavez started off as a real revolutionary who wanted to uplift the poor with sincere commitment. But later his agenda got totally lost in hubris and anger against the opposition which overthrew him (for 48 hours) in the 2002 coup. Chavez went on a ruthless revenge against the political and business oligarchs as well as the middle class with a series of destructive measures such as currency, import and price controls and systematic dismantling of checks and balances of democratic instituitions. He squandered the windfall oil profits in wasteful and fancy projects.

Maduro’s re-election in May 2018 has been called as illegitimate and  has not been recognised by the Venezuelan opposition parties. The Maduro government had banned opposition parties and imprisoned or exiled many leaders preventing participation in the elections on trumped up charges. The snap election itself was called prematurely by an illegal Constituent Assembly which usurped the powers of the legitimate Congress in which the opposition has the majority. If a proper election is held, the opposition would come to power undoubtedly as they won in the Congressional elections in 2015.

The Venezuelan opposition, which used to organise vigorous protests in the past has now run out of steam and is divided. They tried dialogue with the government through the mediation of Vatican. This too failed. People fear coming out for protests after violent crackdown in which over one hundred protestors were killed in police shootings in 2017.
Clearly, the country is crying out for liberation from the hopeless mess. There is no possibility of economic recovery or correction of political course under President Maduro who is simply incompetent and impotent. His rivals are waiting to stab him in the back at the first opportunity. He has ensured the support of the military by giving them control of lucrative businesses such as food distribution and the petroleum sector. The Chavistas and their military collaborators plunder the country with impunity and in a hurry since they do not know how long the regime would last.
Chavez, a long time admirer of Fidel Castro sought the “merger of the two revolutions. He nominated Maduro as successor from his deathbed in Havana, on the advice of the Castros. The Cubans have been helping the Chavista regimes with intelligence through their advisors in Venezuela. They guide Maduro how to survive American conspiracies and sanctions, based on their long experience. The thousands of Cuban doctors who work in the slums and rural areas of Venezuela are the eyes and ears of the Chavista government. In return, Cuba gets Venezuelan oil on generous terms. 

Venezuela has become like a Cuba with shortage of essential items, long queues and citizen controls. But there is a big difference. The Cuban people, although denied freedom, do not go hungry. They have the best healthcare and education. They are optimistic that life could become only better in the future. The Cubans have a joke, ‘It is only the first hundred years of the revolution which are difficult, before the socialist paradise’. But the Venezuelans suffering under the Chavista regime for the last twenty years are wondering if they are in for “One Hundred years of Suffering”.  

The twelve Latin American countries of the Lima Group (including Brazil, Argentina and Colombia) as well as the European Union, Canada and USA have  condemned the rigged re-election of Maduro and refused recognition. They have threatened sanctions and restrictions to further isolate Venezuela which has already been suspended from Mercosur. But Venezuela receives some limited support from China, Russia and Turkey as well as from Bolivia, Nicaragua, El Salvador and Mexico in Latin America.

The Maduro regime would collapse if the US imposes oil sanctions against Venezuela, as it did in the case of Iran. US, the largest importer of Venezuelan oil, can afford to forego since it has become much less dependent on imported oil thanks to the shale revolution which has made US as the largest oil producer in the world again. Although the US has imposed some cosmetic sanctions against Venezuelan bonds and leaders, the Administration does not want to cause losses to the few American refineries which use exclusively Venezuelan crude. In any case, the US is not in a hurry to stop the bleeding of Venezuela since it is enjoying the spectacle of the Venezuelan misery as a scarecrow deterring the spread of socialism in the region. Along with Venezuela, Ortega’s authoritarianism in Nicaragua and the traditional bogey of Cuba have given a new agenda to fight against the “ Troika of Tyranny and Triangle of Terror” for the neo-cold war warrior National Security Advisor John Bolton who is eager to repeat interventions in the ‘backyard’ since the days of the Monroe Doctrine.

India is the second largest importer of Venezuelan oil, importing around 350,000 barrels per day annually. In 2017-18 imports were 5.85 billion dollars. In the first six months of 2018-19 (April-October), the imports increased to 4.6 billion dollars due to the rise in oil prices. These imports are part of the strategic energy policy of India to reduce overdependence on the Middle East and to diversify sources of imports. ONGC Videsh Ltd (OVL) has invested over a billion dollars in the Venezuelan oil fields. Although India’s exports are not high, there is potential for growth. With these interests, India does not comment on Venezuelan domestic affairs and maintains relations with the government in power pragmatically.

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