Commodity shortages and inflation

During the spring and summer of 2014, the government began to seriously address the challenges associated with goods shortages and inflation. Central to this problem was the increasing difference between the official exchange rate regulated by the state exchange system (formerly Cadivi, now Sicad) and the exchange rate on the black exchange market. Venezuela introduced currency controls in 2003 to avoid capital flight and to protect national output. The core of this system was that companies and private individuals could buy foreign currency at very favorable prices on special terms. Since the black stock price of dollars gradually skyrocketed above the official level, it became very beneficial for companies and individuals alike to apply for cheap foreign exchange and then trade the money on the black exchange market.$ 20 billion in 2012. At the same time, the system has also been characterized by a lack of control from the state.

Smuggling across the border

According to the government, currency fraud is one of the reasons for the growing shortage of goods and production problems. At the same time, it was hugely beneficial to smuggle goods to Colombia – according to the government’s own figures, up to 40 percent of food and consumer goods disappear across the border. The opposition and the private sector, for their part, argued that the shortage of goods was due to applications for import currency remaining in the system, and that state takeover of companies and price controls on basic commodities undermined production and drove up inflation. At the same time, stores and retail outlets began to price commodities based on the black stock price of dollars, which further contributed to raising inflation. The government has so far attacked the situation, including regulating profit margins in stores, dialogue with the business community on increased imports, increased state imports, reforms of the exchange system, closing the Colombian border at night and a major offensive against smugglers.

Internal strife

At the ruling party Partido Socialista Unido de Venezuela’s (PSUV) Third Congress in July 2014, newly elected party leader and President Nicolas Maduro announced that the main goal towards the end of the current 2019 presidential term is to reform the economy in a socialist direction. At the same time, dissatisfaction with undemocratic practices was reported and there was room for debate within the party. The Congress, the first after Chávez’s death, came after a heated debate in the wake of former Minister of Planning and Chávez’s close supporter Jorge Giordani publishing a bitter criticism of the government and Maduro himself. According to Giordani, Maduro showed poor leadership skills and assessment skills. He claimed that the real power now lay with other groups. In the debate that followed, many commentators believed that a dividing line was drawn between the pragmatists and the radicals within the government: a line that would follow a radical, socialist program in Chávez’s spirit, and a more reform-friendly and less ideologically oriented wing. In August 2014, the opposition coalition Mesa de la Unidad Democrática (MUD) also held a conflict-filled internal meeting. Among other things, the profiled organizational secretary Ramon Guillermo Aveledo resigned, and disagreements over López’s and Corina Machado’s “exit” strategy continued to split the alliance inward. In August 2014, the opposition coalition Mesa de la Unidad Democrática (MUD) also held a conflict-filled internal meeting. Among other things, the profiled organizational secretary Ramon Guillermo Aveledo resigned, and disagreements over López’s and Corina Machado’s “exit” strategy continued to split the alliance inward. In August 2014, the opposition coalition Mesa de la Unidad Democrática (MUD) also held a conflict-filled internal meeting. Among other things, the profiled organizational secretary Ramon Guillermo Aveledo resigned, and disagreements over López’s and Corina Machado’s “exit” strategy continued to split the alliance inward.

Grass root and land reform

Since 2006, the so-called “neighborhood councils”, consejos comunales, have been the main focus of social mobilization and social investment in poor areas, while the public housing project Gran Mision Vivienda Venezuela has, according to government figures, built 591,000 new homes since 2011. In August 2014, Maduro announced that $ 1.2 billion will be invested in further upgrading and improving slums, infrastructure and building services, and aims to eradicate extreme poverty (8.8 percent as of 2013) by 2019.

Around 4 million hectares of land have been redistributed since 2005 as part of the government’s land reform. Despite increased food production, underproduction and a lack of effective government follow-up are also reported. The country is still fully dependent on imports to meet the population’s food needs. Over 300 killings of peasants and indigenous activists since the turn of the millennium, including Indigenous leader Sabino Romero in March 2013, shows that landowners are still in power in the countryside. There have also been several conflicts between the state and workers in the nationalized industrial companies, not least in the country’s largest (and Latin America’s fourth largest) steel producer SIDOR, which was nationalized in 2008. Clash between striking workers and the National Guard in August 2014, as well as allegations from Nicolas Maduro and National Assembly President Diosdado Cabello on “trade union mafia” were the highlights of a protracted conflict going back several years. The conflicts in the state enterprises are linked to investments and continuity in the state framework conditions, collective agreements, pay and pension conditions and the balance of power between the management and the workers.

Crime, corruption and cocaine

Over the past few years, Venezuela’s crime rates have increased alarmingly, and murder rates are now among the world’s highest. The government’s latest estimate of 39 kills per 100,000 population in 2013, down from 2012 when it was estimated 57 kills per 100,000 population. This problem has deep roots in poverty and social marginalization, but is also greatly reinforced by an ineffective legal system, a corrupt police force, a low-income prison system and the drug economy flowing from Colombia. Reforms that include the formation of new police forces, increased focus on ethics and human rights in police education, increased cooperation between local communities, the state and the police, and increased public presence of police and military have so far not significantly impacted crime statistics, and the survey shows crime at the top of the list of population concerns

Venezuela and the United States

The relationship between Caracas and Washington has been going through wave valleys since Chávez was first elected in 1998. There are very strong indications that the United States was involved in the coup in 2002, and they have also later channeled large sums into the opposition both through Congress and organizations such as the National Endowment for Democracy (NED). Wikileaks documents published in 2010 and 2013 also shows that the US Embassy in Caracas has worked to strengthen opposition sectors and to undermine the government’s supporter base. Following the riots in spring 2014, the relationship has become considerably more strained. In July 2014, the US State Department revoked visas for several high-ranking public figures who they believe are responsible for human rights violations during riots earlier this year. At the same time, a resolution on broader sanctions, including travel bans and freezing of bank accounts of government members, was approved in both the US Congress and the House of Representatives in the summer of 2014.

Poverty and Millennium Goals

According to Countryaah.com, Venezuela has been applauded by the UN for reaching a number of the Millennium Goals long before 2015. Comprehensive pension reforms have also strengthened the safety net for the elderly. As of 2013, the official income-based poverty rate stands at 27.3 percent, the minimum wage is among the highest in the region, and the GINI indicator (which measures the distribution of wealth between poor and rich) is the lowest in the region. In other words, the country has come a long way in reducing poverty and raising living standards for the most vulnerable. At the same time, the country faces a number of structural and political challenges that make the road ahead for the Bolivarian process difficult and uncertain.

FACTS:

Capital: Caracas
Population: 30.9 million (2016)
Life expectancy: 75.7 years (2016)
Infant mortality: 12.5 per 1000 (2016)
Religion: Catholicism 96%, Protestantism 2%, other 2%
Official languages: Spanish
GDP per capita: US $ 15,100 (2016)
Currency unit: Bolivar
Main article of export: Oil, bauxite, aluminum, minerals, chemicals and agricultural commodities.
Regional relations: Member of Mercosur, CELAC, UNASUR, PetroCaribe, ALBA, OAS